Risk corridors plan could squeeze insurers

Managers of the new federal risk corridors program have figured out what they’ll do if they run out of cash: make a partial payment during the year, and then use revenue from the next year to pay the balance.

Although the “payment stretching” solution could fix the cash-flow problem at the risk corridors program, it could create a new cash-flow accounting headache for the carriers expecting the money.

Officials at the Center for Consumer Information & Insurance Oversight talk about risk corridors program payment stretching in a new fact sheet.

The risk corridors program is supposed to guard against big, Patient Protection and Affordable Care Act-related swings in claim risk, by using cash from highly profitable carriers to ease the pain of poorly performing carriers.

When a carrier is calculating its PPACA medical loss ratio, it will have to count the full amount of incoming risk corridors program money in its revenue for the current reporting year, officials say.