Close Close
Sign In
Newsletters
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards
Podcast Center Video Center Webcasts Resource Center Events
About ThinkAdvisor Contact Us Advertise With Us Asset & Logo Licensing Sitemap Terms of Service Privacy Policy Copyright © 2024 ALM Global, LLC. All Rights Reserved.
ThinkAdvisor

Life Health > Health Insurance

Actuaries trace risk corridor maze

By Allison Bell

X
Your article was successfully shared with the contacts you provided.

Carriers have almost no way to know how the new federal “risk corridor” will really affect them this year.

Hans Leida and Doug Norris, Milliman actuarial consultants, write about how unpredictable the program is in a new commentary.

Congress created the program to keep the new Patient Protection and Affordable Care Act health underwriting restrictions from killing off carriers.

Some PPACA critics have called the risk corridor program a bail-out for health insurers.

But, in the real world, the idea that the risk corridor program will make big payments to insurers that do poorly is not necessarily correct, Leida and Norris write.

PPACA has eliminated insurers’ ability to reject sick applicants for individual health coverage or charge those people higher rates.

To compensate, PPACA calls for the risk corridor program to pay cash to some insurers in the individual market.

To get cash, the actuaries write, an insurer must a profit margin of less than 3 percent of premiums on the private “qualified health plan” coverage it sells through the new PPACA exchanges.

The risk corridor program is supposed to get most of its cash from QHP issuers that do well.

The insurers that are applying for payments will have to pool their QHP experience with their non-exchange plan experience, Leida and Norris write.

Carriers with terrible QHP claims and good non-exchange plan results may get no risk corridor money at all, especially if they get a majority of their revenue from non-exchange plans, the actuaries warn.

The Obama administration is proposing to change some risk corridor program parameters.

“The changes to the risk corridor program could provide relief, but a lot will depend on how exactly the administration changes the parameters in the formula,” the actuaries write.

See also:

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.