Dive Brief:
- Susan Poling, general counsel for the Government Accountability Office, issued a legal opinion last week stating that Congress will need to approve language that permits the Department of Health and Human Services to appropriate money for the risk corridor program in fiscal year 2015.
- The letter was a response to a query from Sen. Jeff Sessions (R-AL) and Rep. Fred Upton (R-MI) requesting clarification of HHS' role in collecting and distributing the funds from the risk corridor.
- Poling determined the Affordable Care Act created the risk corridor provision, but there was no language to enact an appropriation in the legislation. Appropriations must be expressly stated in a law, she said.
Dive Insight:
Risk corridors are one of the "three R's" created in the ACA with the intent of mitigating the losses to insurers in the state exchanges and keeping prices down for consumers. Risk corridors, reinsurance and risk adjustments have been touted as bailouts by detractors and ways to help keep the exchanges working smoothly by proponents.
In the risk corridors provision, insurers in the exchanges that receive profits totaling at least 3% more than their premium revenue are required to contribute funds to the account. Insurance companies that make at least 3% less than their premium revenue can take money from the fund to cover some of their losses. It is difficult to tell how insurers will fare during the second year of operation in the exchanges. It wouldn't be surprising if premiums did not fully cover payouts mainly because of the age distribution in the plans. Only about 6% of enrollees are ages 18 and younger and 28% are young adults—though a Health Affairs article on the exchange population did note that insurers have reported the health status of enrollees to be about as they expected when setting premiums.