HHS could pay out $1B to insurers for reinsurance, risk corridor, risk adjustment

The Department of Health and Human Services will likely be paying insurers more than $1 billion this year for the "three Rs" of the Affordable Care Act--risk adjustment, reinsurance and risk corridors--according to a new Citigroup report.

The "three Rs" of the ACA have been under scrutiny of critics who believe they are most certainly bailouts, while other supporters praise the programs as ways to keep premiums in check, FierceHealthPayer previously reported.

In its analysis, Citigroup concluded that more than 85 insurers accrued $45 million in payments for risk adjustments, $1.2 billion for reinsurance and $410 million for the risk corridor program in the first half of 2014. Those insurers enrolled about 13.5 million individual consumers and will make more than $40 billion in individual premiums this year.

Citigroup noted that insurers will likely expect to receive "exponentially" more reinsurance payments in the second half of this year. However, their requests will still probably be less than the $10 billion total reinsurance pool.

As for individual insurers, Citigroup found that some like Aetna, Cigna and WellPoint haven't so far assumed any benefits for either risk adjustment and risk corridors, while other insurers like Humana were much more aggressive in their assumptions.

Citigroup also noted that many insurers assumed they would receive a risk adjustment payment after the first quarter, but very few expected to fund the program. But since the second quarter, some insurers, including Blue Cross Blue Shield plans and Health Net, are now estimating they will be making "sizeable" risk adjustment payments.

Although Citigroup used that data to predict that HHS could be funding more than $1 billion to insurers, it noted that "there won't be nearly enough plan contributions to fund these requests (just one plan in our sample recorded a risk corridor payable, and it was for only $2 million), and what could soon be a Republican controlled Congress isn't likely to appropriate additional funds."

To learn more:
- here's the Citigroup report