HHS to boost risk payments to insurers due to reinstated policies

Insurers offering exchange plans could receive higher risk payments under a proposed rule from the U.S. Department of Health & Human Services on Monday.

After overestimating the total covered claims costs of individuals enrolled in reinsurance-eligible plans in 2014, HHS wants to lower the attachment point at which risk payments kick in for high-cost members from $60,000 down to $45,000 next year. In 2015, insurers will have a $70,000 attachment point, a $250,000 reinsurance cap and a 50 percent coinsurance rate.

Federal health officials agreed to pay insurers certain risk payments for the first three years to compensate for uncertain exchange enrollment, Reuters reported.

In the proposed rule, the Obama administration also admits its directive to reinstate canceled policies for one year could hurt the health insurance exchanges, according to The Hill's Healthwatch.

HHS noted people who choose to stay on their existing plans likely have lower health risk than those enrolling in reform-compliant individual and small group plans."If lower health risk individuals remain in a separate risk pool, the transitional policy could increase an issuer's average expected claims cost for plans that comply with the 2014 market rules," the rule states.

And since insurers set exchange premiums based on a risk pool of healthier applicants from the non-grandfathered plans, they could see higher expected claims costs and unexpected losses, according to HHS.

The proposed rule also includes provisions for risk adjustment data validation that adhere to HHS goals of consistency and fairness by creating uniform audit requirements. HHS also aims to ease the burden on issuers by coordinating any audits of risk adjustment covered plans with related audits of exchange programs and reinsurance eligible-plans.

The proposed rule, published on Monday in the Federal Register, has a 30-day comment period.

To learn more:
- here's the proposed rule (.pdf)
- read the Reuters article
- here's the Healthwatch article