Report: Reinsurance windfall not enough to keep ACA plans from steep losses

Though insurers received larger-than-predicted payouts from the reinsurance program in 2014, they still lost more than $2.2 billion on Affordable Care Act exchange plans that year, according to a new report from George Mason University's Mercatus Center.

The federal government revised the payment formula for the reinsurance program twice after insurers set premiums for the first year of full ACA implementation, leading to payments from the program that were 40 percent more per enrollee than insurers had expected, the report says. Congressional Republicans have criticized these policy changes, saying they were an attempt by federal health officials to "prop up Obamacare" in light of the program actually coming up short on collections for 2014.

In fact, in the absence of that windfall, insurers would have had to set their 2014 premiums more than 25 percent higher to cover the cost of offering individual market qualified health plans on the exchanges, the report says.

The findings add more evidence to the increasingly bleak picture that insurers have painted of their individual market products' financial performance. Facing steep losses, UnitedHealth will pull out of all but a handful of ACA marketplaces, the Blue Cross Blue Shield Association has warned its member plans' enrollees were sicker than expected, and more than half of the consumer operated and oriented plans (CO-OPs) have shut down.

Some say these are signs of an impending "death spiral" on the exchanges, while others see a young market that requires more time and adjustment in order to stabilize.

The Mercatus Center report points out that insurers' experiences on the exchanges in 2014 varied widely; while CO-OPs struggled, narrow-network plans did relatively well. However, the authors note that with the temporary reinsurance and risk corridor programs nearing an end, the question is whether insurers will be able to reverse their ACA losses through higher premiums and plan redesign--or if the exchanges are in fact unsustainable.

To learn more:
- here's the report (.pdf)

Related Articles:
CMS sets sights on stabilizing Affordable Care Act exchanges
With insurers' ACA troubles, specter of 'death spiral' rises again
Q4 earnings roundup: Big five insurers' ACA exchange woes deepen
Andy Slavitt, GOP lawmakers spar over reinsurance payments

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