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CMS will seek ways to make up for risk corridor shortfall

If collections fall short for 2016, gov't will 'explore other sources of funding,' memo says

A new memo from the federal government emphasizes that it intends to find a way to make up for future shortfalls in the Affordable Care Act risk corridor program.

The Centers for Medicare & Medicare Services (CMS) announced in October that risk corridor payments for the 2014 benefit year will fall considerably short, with the government only able to pay insurers 12.6 percent of what they were owed. The shortfall is due to the fact that more insurers sought risk corridor payouts than those that had to pay into the program, which is intended to mitigate the risk of operating on the ACA exchanges, FierceHealthPayer has reported.

In a memo issued Thursday, CMS stated that "the remaining 2014 risk corridors payments will be made from 2015 risk corridors collections, and if necessary, 2016 collections." But if there is a shortfall for the 2016 program year, the Department of Health and Human Services (HHS) will "explore other sources of funding" for risk corridors payments, which may require working with Congress to secure more funding.

"HHS recognizes that the Affordable Care Act requires the [HHS] secretary to make full payments to issuers, and HHS is recording those amounts that remain unpaid following our 12.6 percent payment this winter as fiscal year 2015 obligation of the United States government for which full payment is required," the memo states.

The new memo may be the government's attempt to reassure payers that are wary of counting on the payments, especially given recent news about how the risk corridor shortfall factored prominently in several consumer operated and oriented plans' decision to close. What's more, UnitedHealth cast doubt about the exchanges' overall viability when the insurer adjusted its 2015 earnings outlook Thursday.

A report from Standard & Poor's earlier this month estimated that as in the 2014 benefit year, the 2015 risk corridor will be significantly underfunded. Additionally, if the three Rs of risk corridors, risk adjustment and reinsurance don't function properly, insurers are likely to experience a more volatile operating performance, the report said.

To learn more:
- here's the memo

Related Articles:
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Risk corridor program may hurt insurers, cause market uncertainty
ACA debate: Risk corridors, reinsurance, risk adjustment on the table