Risk corridor program shortfall hurts more than just CO-OPs

When the federal government said it could pay only a small portion of what it owed in risk corridor program payments for 2014, it was not yet clear which and how many insurers would be affected. Now the picture is starting to get slightly clearer.

The risk corridor program is intended to reduce the financial risk of health plans operating on Affordable Care Act exchanges by collecting funds from insurers with more successful exchange business and distributing the fund to less successful insurers. But more sought payments for 2014 than paid into the program, so the government will only be able to pay 12.6 percent of the $2.87 billion that it owes insurers, FierceHealthPayer has reported.

In its announcement this week that it plans to close, the consumer owned and operated plan Kentucky Health Cooperative (CO-OP) put part of the blame on the risk corridor shortfall. As its CEO said in a statement: "In plainest language, things have come up short of where they need to be."

But CO-OPs, which have faced financial struggles even before the risk corridor announcement, aren't the only health plans that may take a hit because of the shortfall. Small plans of all types are likely to face losses, Colorado HealthOP CEO Julia Hutchins told LifeHealthPro.

One example, according to the article, is a provider-owned health maintenance organization WINhealth, which has said it will withdraw from Wyoming's exchange in 2016 in part because of the uncertain status of its risk corridor payments.

And when Pittsburgh-based Highmark Health announced operating losses in early April, it cited negative results from selling Affordable Care Act health plans and uncertainty about the collectability of risk corridor payments. But because it was uncertain about whether it would recoup the $155 million it was owed through the program, Highmark said it took an "appropriately conservative accounting approach" concerning the payments.

Neither government regulators nor industry groups such as America's Health Insurance Plans have released any data about how many overall insurers will be affected by the shortfall, LifeHealthPro notes.

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