Could the bottom lines of health insurers erode due to an obscure risk-sharing provision in the Affordable Care Act?
Risk corridors, created under the ACA, were intended to protect health carriers from potential losses as the program got off the ground, primarily from the adverse selection of new enrollees.
But they may not shield insurers as originally intended, according to Scott Gottlieb, M.D., a conservative writer and fellow at the American Enterprise Institute who has long been critical of the way the ACA is structured.
The risk corridor formula uses a combination of payments from health plans with lower-risk enrollees to plans with higher-risk enrollees and reinsurance payments from the government directly to insurers. For the first 5 percent of any gain or loss, the insurer and the federal government would split the gain or liability. For anything above that, the government would assume 80 percent of the liability and reimburse the insurers accordingly.
But the program was altered by a Republican-backed provision in the recent omnibus spending bill intended to make any payments budget neutral, claiming that they amounted to a bailout for insurers. Insurers blasted the amendment, saying it would lead to higher premiums in the future.
Gottlieb wrote that the change was compounded by the fact that many health insurers apparently made their rates within the state health exchanges more competitive for 2015 because they were relying on risk corridors to indemnify any potential losses.
Although Gottlieb did not provide any specific figures regarding the inter-payer or reinsurance payments, he concluded that some health plans, such as Humana, are heavily reliant on risk corridor reimbursement.
Those insurers "could find that they need to lower their earnings forecasts as a result, and take a charge for 2014 on money that doesn't materialize," wrote Gottlieb. He estimated that Humana could see a hit of as much as 2 percent this year and 4 percent in 2016. Cigna and Health Net are other plans that could also take a big earnings hit, according to Gottlieb.
Insurers are supposed to file 2014 enrollment calculations with the Centers for Medicare & Medicaid Services later this month--the agency would use those figures to make amendments to its risk corridor program, Healthcare Dive reported.
Insurers slam GOP spending bill for capping risk corridor payments
HHS could pay out $1B to insurers for reinsurance, risk corridor, risk adjustment
New CMS rule targets risk corridor program
ACA debate: Risk corridors, reinsurance, risk adjustment on the table