Dive Brief:
- Insurers will be paid less than 2% of the $5.9 billion owed by the federal government in 2016 through the Affordable Care Act risk corridor program, according to a Washington Post article published last week.
- The $96 million out of nearly $6 billion owed is around one-fourth less than the sum delivered to insurers through the risk corridor program in 2015, which was only 12.6% of what insurers were owed.
- The Obama administration made no public announcement regarding the shortfall and an executive for one insurer said they did not even receive official notice of the payout, according to the report.
Dive Insight:
Shortly before Thanksgiving, CMS quietly posted a notice listing the amounts being paid to insurers through the risk corridor program. Payers most likely weren’t feeling especially thankful for the federal government upon seeing those numbers.
The lack of funds being delivered to payers through the risk corridor program highlights one glaring problem with ACA exchanges. The risk corridor program was intended to motivate payers to take on sicker patients in the individual insurance market by redirecting funds from payers with lower than expected costs to those with higher than expected costs. However, there have been a lot more payers with higher than expected costs than lower than expected costs.
Around 70% of 400 payers referenced in the recent CMS notice on risk corridor payments are owed money while only 15% had low enough expenses that they had to pay in, Deep Banerjee, a Standard & Poor credit analyst told the Post. In its first two years, the risk corridor program saw a combined $8 billion shortfall.
Payers owed money are now in an odd position. Last month, a federal judge tossed out Illinois health insurance co-op Land of Lincoln Health’s lawsuit seeking more than $75 million it claims it was owed by the government under the ACA’s risk corridors program. Humana this month announced it will write-off $591 million in receivables associated with the risk corridor program under the ACA.
While Humana stated the Land of Lincoln case decision spurred the write-off noting "a change in interpretation of the Affordable Care Act associated with a recent court decision involving parties unrelated to the company now requires the company, under applicable accounting rules, to write-off essentially all of the $591 million in receivables associated with the risk corridor premium stabilization program outstanding as of September 30."