Dive Brief:
- The risk corridors program, which was one of the intended safeguards for health insurers facing high costs from sick new enrollees under the ACA, is severely short on cash as it heads into 2016, Standard and Poor’s announced last week.
- “We estimate that that the 2015 ACA risk corridor will be significantly underfunded, as was the case the previous year,” wrote Standard and Poor’s analyst Deep Banerjee.
- Banerjee suggested external funding would be needed for 2016, which would likely require intervention by Congress.
Dive Insight:
In the risk corridor program, the administration redistributes funds from insurers with high profits to insurers with losses. However, during the first two years of the ACA, too many insurers racked up losses for the system to accommodate, because they intentionally lowered prices to attract customers.
According to the report, at this point the risk pool just has $1 for every $10 in claims, but things could look up in 2016 as insurers increase their premiums, Banerjee said.
A more concrete solution, however, would be to move cash from the reinsurance risk fund to the risk corridor program, Banerjee suggests, because that fund, which serves a similar purpose by compensating insurers for high-cost customers, had a surplus of $800 million as of the end of 2014.
The administration has not said whether it is considering solutions to fund the program, The Hill reported.