Lawmaker takes on PPACA risk program

“The best measure of their success is that participation by both health plans and Medicare beneficiaries is still robust in the program’s ninth year,” Hoadley said, according to a written version of his testimony posted on the committee website. 

The federal government earned a $1.1 billion profit on the Medicare Part D risk-management programs in 2012, Hoadley said. He added that about three-quarters of the Medicare Part D plan issuers are paying cash into the programs, rather than pulling cash out.

Edmund Haislmaier, a health specialist at the Heritage Foundation, said the PPACA risk corridor program is different from the Medicare Part D program. The companies selling PPACA-compliant individual major medical policies know a lot more about how those products will work than the designers of the first Medicare Part D plans knew about how those products would work, Haislmaier said.

“There does not appear to be much of a rationale for the risk corridor program as it is structured in the PPACA,” Haislmaier said. “While insurers certainly face a number of uncertainties with respect to how markets will operate under the new PPACA rules, and while it is likely that their ‘profit or loss risk’ will initially be somewhat elevated, the magnitude of the additional risk does not appear to be either unique or high enough to justify a risk-corridor program to mitigate profit and loss risks.”

PPACA also created a risk-adjustment program and a reinsurance program to protect insurers against the cost of covering high-risk and high-cost enrollees. Those programs are supposed to use their own revenue to pay for themselves. Those programs should be enough to protect insurers against any unusual, PPACA-driven shifts in the flow of risk, Haislmaier said.