(Bloomberg) — Industry sources have told the Washington Examiner’s Susan Ferrechio that the Obama administration is thinking of extending the Patient Protection and Affordable Care Act (PPACA) risk corridor program.
This is not the first time we’ve seen this idea floated, and frankly, believing that the administration is considering it is all too easy.
The so-called PPACA 3 R’s risk-management programs are supposed to help insurers adjust to new PPACA underwriting rules and the creation of the public exchange system.
The 3 R’s include a “permanent” risk-adjustment system, that reimburses insurers as the plan year goes on based on enrollee risk scores; a “temporary” reinsurance program, which is supposed to protect insurers against high-cost patients; and a “temporary” risk corridor program, which is supposed to protect public exchange plans underwriting profit margins.
The risk corridor program is supposed to offset an exchange plan’s losses when claims are greater than 103 percent of projections. The program will try to get the money to make insurers whole from exchange – and non-exchange — insurers with claims that are less than 97 percent of what they expected. The program is not designed to be revenue-neutral. If most health insurers lose money, the federal government might have to help make up for the lack of funding from profitable insurers.