Analysts at Standard & Poor’s Ratings Services say the effects of funding restrictions on the Patient Protection and Affordable Care Act (PPACA) risk corridors program may cause the program to hurt small and midsize health insurers.
Drafters of PPACA created the risk corridors program in an effort to make selling health insurance under PPACA rules less risky, by using cash from health insurers with good underwriting results for 2014, 2015 and 2016 to help insurers that get poor results for those years.
Originally, insurers thought the Centers for Medicare & Medicaid Services (CMS), the U.S. Department of Health and Human Services (HHS) division running the risk corridors program, could use general HHS funding to help to make up for any lack of contributions from insurers with good underwriting results.
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HHS officials said in April 2014 that they would try to run the program in a “revenue neutral” fashion, without using taxpayer money.
Congress later put a provision prohibiting HHS from using taxpayer money to fund the risk corridors program in a government funding bill. President Obama signed the bill into law in December 2014.
Deep Banerjee and other S&P analysts say in a new commentary that health insurers with good results for 2014 may pay in enough cash to cover only about 10 percent of the “receivables,” or money that insurers with poor results are hoping to receive.