Actuaries slam risk corridor proposalNews added by Benefits Pro on April 28, 2014
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By Allison Bell

Insurance industry groups say the federal health law gives the U.S. Department of Health and Human Services no authority to limit how much it spends on a new carrier protection program.

The Centers for Medicare & Medicaid Services says it wants to make the “risk corridor” program “budget neutral.”

The program is supposed to limit the effects of new Patient Protection and Affordable Care Act health insurance rules by shifting cash from carriers with high underwriting profit margins to carriers that report underwriting losses or have low underwriting margins.

Government analysts are expecting the risk corridor program to generate enough carrier contributions and low enough outlays to produce a profit for the government.

But, if carriers do poorly across the board, and the need for support is greater than funding, then HHS will find ways to use the money in the program vault to meet the need for support, not try to get other money to pay for the program, CMS says.

Anthony Mader, a vice president at WellPoint Inc., thanked CMS for proposing to increase the risk corridor program profit margin floor to 5 percent, from 3 percent, but said nothing about the budget neutrality proposal.

America's Health Insurance Plans and the Blue Cross and Blue Shield Association are both opposing the budget neutrality provision.

Barbara Klever, chair of the risk-sharing work group at the American Academy of Actuaries, says limiting the amount of cash available to what carriers put in would change the basic nature of the program.

If carriers can share some risk, that gives them an incentive to sell coverage through the exchanges and hold prices down, Klever writes.

“This could be particularly important for smaller and new issuers that may not be able to fully absorb the risk of mis-pricing in the new market,” she says.

If carriers can’t share any risk with CMS, they might stay out of the exchanges in 2015 or charge higher rates, Klever says.

CMS has talked about “stretching payments,” and using cash from future years to eventually make up for any gaps in risk corridor program payments in the short term.

Originally published on BenefitsPro.com
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