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Temporary risk corridors
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| Healthcare policy in the U.S. |
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| Obamacare overview |
| Obamacare lawsuits |
| Medicare and Medicaid |
| Healthcare statistics |
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The temporary risk corridor program was established under the Affordable Care Act to limit the losses and gains of insurers in the reformed individual market. Health plans with lower than expected medical claims were required to pay into the program, while health plans with higher than expected claims received money from the program.
Overview
Insurers that sell plans on the insurance exchanges have a target amount for expenditures on medical claims for enrollees. Under the risk corridor program, exchange insurers who paid a lower amount in medical claims than expected and fell below the target amount were required to pay half of the difference between their actual costs and target costs to the federal government. Exchange insurers that paid a higher amount in medical claims than they expected then received payments from the federal government. In subsequent appropriations bills following the passage of Obamacare, Congress specified that payments under the risk corridor program could not exceed collections, meaning funds could not be transferred from other programs to make risk corridor payments.[1]
Insurers that made less than 97 percent of their expected amount in claims were required to pay into the program, while insurers that made more than 103 percent of their expected amount in claims received payments. Those falling in between neither paid into the program nor received funds.[1]
The program was meant to stabilize premiums and protect against inaccurate rate-setting by spreading risk. Due to a lack of funds for the program, the Centers for Medicare and Medicaid Services (CMS) paid just 12.6 percent of what insurers requested for the 2014 benefit year, a $2.5 billion shortfall. For the 2015 benefit year, CMS owed $5.8 billion. As of December 2016, the agency owed insurers a total of $8.3 billion to cover losses for 2014 and 2015, which it said it hoped to pay out for the 2015 or 2016 benefit years, the final years of the program.[2][3][4]
On June 14, 2018, a federal appellate court ruled that the federal government did not have to make payments to insurers under the risk corridor program. The suit was brought by two health insurers, Moda Health and Land of Lincoln. The court ruled 2 to 1 that the federal government did not have to make risk corridor payments because Congress took action after the enactment of Obamacare to ensure that the program remain budget neutral from year to year.[5]
See also
- Obamacare overview
- History of healthcare policy in the United States
- Permanent risk adjustment
- Transitional reinsurance
External links
- Healthcare.gov glossary
- Kaiser Family Foundation, Explaining Health Care Reform: Risk Adjustment, Reinsurance, and Risk Corridors
Footnotes
- ↑ 1.0 1.1 The Henry J. Kaiser Family Foundation, "Explaining Health Care Reform: Risk Adjustment, Reinsurance, and Risk Corridors," January 22, 2014
- ↑ Modern Healthcare, "Feds short insurers $2.5 billion on exchange plan losses," October 1, 2015
- ↑ Centers for Medicare and Medicaid, "Reinsurance, Risk Corridors, and Risk Adjustment Final Rule," March 2012
- ↑ Modern Healthcare, "The state of the ACA's risk corridors," December 5, 2016
- ↑ Politico, "Court: Federal government doesn't owe insurers Obamacare payments," June 14, 2018
