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House team sees PPACA risk program funding woes

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Issuers of public health insurance exchange plans may have trouble getting as much cash out of the new federal health insurance risk-management programs as they think they should, according to investigators at the House Oversight and Government Reform Committee.

The investigators came up estimates of the future benefits obligations at two of the three Patient Protection and Affordable Care Act (PPACA) risk programs by surveying 15 health insurers and 23 CO-OPs. The 38 carriers cover about 80 percent of the people who now have individual qualified health plan (QHP) coverage.

One of the PPACA “three R’s” programs, a temporary reinsurance program, is supposed to collect a $63 fee this year for each of 191 million commercial health plan members. The U.S. Department of Health and Human Services (HHS) will use the money to protect issuers of PPACA-compliant individual policies. The policies cover about 17 million people.

For an enrollee with high claims, HHS will use the reinsurance fee money to pay 80 percent of a high-cost patient’s claims from an attachment point of $45,000 up to a $250,000 cap. PPACA limits the total amount of reinsurance payments to $10 billion.

The House Oversight investigators focused mainly on the other two three R’s: a temporary risk-corridor program and a permanent risk-adjustment program.

  • The risk-corridor program is supposed to use money from carriers with good underwriting results to help QHP issuers with bad results.
  • The risk-adjustment program is supposed to use money from insurers with low-risk enrollees to compensate insurers for covering high-risk enrollees.

PPACA does not say what HHS should do if the department fails to collect enough corridor money from insurers with good results to compensate the insurers with bad results. HHS says it wants to rely entirely on insurer payments. Insurers want HHS to get money from the Treasury if insurer money runs out. HHS has talked about dealing with any payment gaps by using risk-corridor money from the following year to make good on current-year obligations.

In May, 12 of the 15 traditional insurers and seven of the 23 CO-OPs said they thought they would be getting risk-corridor program money.

Seven of the insurers said they thought they would get risk-adjustment payments.

The insurers said they were expecting to get a total of $725 million in risk-corridor payments for 2014 and $346 million risk-adjustment payments — or about $1 for $10 in PPACA reinsurance program payments.

The size of the risk program payment expectations might be a sign that some of the insurers set QHP prices too low, investigators say.

“The three R programs, which insulate companies from significant losses, provided issuers with a strong incentive to price aggressively to gain market share,” the investigators say. 

The investigators say Obama administration officials talked directly with America’s Health Insurance Plans and the Blue Cross and Blue Shield Association about efforts to compensate for last-minute PPACA rule changes by making the risk-corridor program more generous.

Some of the officials involved in the effort included:

  • Valerie Jarrett, a senior advisor to President Obama.
  • Chet Burrell, the president of CareFirst Blue Cross Blue Shield.
  • Tara McGuiness, the White House communications director.
  • Chris Jennings, the deputy assistant to the president for health policy.
  • Jeanne Lambrew, the deputy director of the White House Office of Health Reform.
  • Julian Harris, associate director of health programs at the Office of Management and Budget.
  • Al Bingham, senior actuary at the Center for Consumer Information and Insurance Oversight (CCIIO). 
  • The investigators say HHS appeased insurance companies by increasing the risk-corridor program profit floor.