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Some insurers will take hit from risk corridor program shortfall

Program will pay health plans only 12.6 percent of what they're owed, CMS says

The federal risk corridor program will pay only a small portion of what it owes to health insurers that offer plans through the Affordable Care Act marketplaces, the Centers for Medicare & Medicaid Services (CMS) announced.

The program collects funds from insurers that are more successful on the exchanges and distributes those payments to less successful insurers to lessen the financial risk associated with operating on the exchanges. It has in the past been criticized as a bailout to insurers.

While health insurers are owed $2.87 billion through the program for 2014, the government will only be able to pay them about 12.6 percent of what they're owed, CMS says. That's because "issuers," or more successful insurers, will pay only $362 million into the program.  

Indeed, the current shortfall means that more insurers sought risk corridor payouts than those that had to pay into the program, Deep Banerjee, a Standard & Poor (S&P) analyst, tells the Wall Street Journal. While not all insurers will take a hit, smaller health plans and those that included risk-corridor payments in their 2014 accounting may face financial strain.

The risk corridor payment shortfall is not entirely surprising, as an analysis this spring from S&P found that the program creates a significant funding gap and ultimately increases uncertainty in the market.

CMS had intended to publish preliminary estimates of risk corridor payments and charges by Aug. 14, but had to delay doing so because of a "significant number of discrepancies" in the data insurers submitted.

The agency will try to pay insurers more of what they are owed in the coming years, a CMS official tells the Washington Post, but this plan depends on how much funding Congress agrees to provide.

For its part, America's Health Insurance Plans (AHIP) appears concerned about the implications of the latest risk corridor program development. "Stable, affordable coverage for consumers depends on adequate funding of the risk corridor program," AHIP President and CEO Marilyn Tavenner said in a statement. "It's essential that Congress and CMS act to ensure the program works as designed and consumers are protected."

To learn more:
- here's the CMS announcement
- read the Washington Post article
- check out the Wall Street Journal report
- here's Tavenner's statement

Related Articles:
Bad data forces CMS agency to put off publishing risk corridor program results
Risk corridor program may hurt insurers, cause market uncertainty
New CMS rule targets risk corridor program
ACA debate: Risk corridors, reinsurance, risk adjustment on the table