Officials at the Centers for Medicare & Medicaid Services (CMS) today posted health insurance companies’ 2014 reinsurance and risk-adjustment report.
In the report, CMS, an arm of the U.S. Department of Health and Human Services (HHS) told affected health insurers how much cash they can hope to get, and how much cash they may have to pay into, two major new Patient Protection and Affordable Care Act (PPACA) health insurance company buffer programs: a temporary reinsurance program and a permanent risk-adjustment program.
The three-year reinsurance program is supposed to use an assessment on all insured plan enrollees to pay part of the medical bills for holders of PPACA-compliant health coverage who had catastrophic medical claims in 2014.
The risk-adjustment program is supposed to shift cash from health insurers that had low-risk enrollees in PPACA-compliant individual and small-group plans in 2014 to health insurers that had high-risk enrollees in PPACA-compliant individual and small-group plans that year.
CMS says the reinsurance program received $8.7 billion in contributions and will pay about $7.9 billion to 484 eligible insurer companies. In California, for example, the most populous state, initial reinsurance program payout totals range from about $347,000 for Local Initiative Health Authority for Los Angeles County to about $401 million for Blue Cross of California, a unit of Anthem Inc. (NYSE:ANTM).
CMS says 758 insurers are participating in the risk-adjustment program, with 469 issuers participating in the individual market, 291 in the individual catastrophic market, and 628 in the small-group market. Those insurers will transfer about 10 percent of the premiums received in the individual market, 21 percent of the premiums received in the catastrophic market, and 6 percent of the premiums received in the small-group market.
In California, for example, Blue Cross may have to pay about $182 million in individual market risk-adjustment transfers, and it might get about $23 million from other insurers in connection with small-group risk-adjustment transfers.
CoOportunity Health, a nonprofit Iowa insurer that failed partly because of uncertainty about the PPACA risk-management programs, could be on track to get $25 million in reinsurance program money and $7.6 million in individual market risk-adjustment money. It might have to pay $3.4 million in risk-adjustment money to other small-group coverage providers.
PPACA drafters created those PPACA risk-management programs and a third program, the PPACA risk corridors program, to protect health insurers against the possibility that the many PPACA policy design rules, underwriting rules and programs that came to life Jan. 1, 2014, could swamp some health insurers with unexpected tidal waves of claim risk.
CMS officials have been talking to health insurance company representatives about how the lifeboat programs will work through guidance documents and webinars, but the U.S. Government Accountability Office (GAO) reported a few weeks ago that some insurance company reps felt as if they were having trouble getting clear information about program compliance details.
Health insurers are supposed to use the data in the reports that came out today in risk corridors program filings that are due July 31.
In a recent webinar slidedeck, CMS officials talk about what health insurers should do if they disagree with the numbers in the reinsurance and risk-adjustment report. For a look at some of what officials say in the slidedeck, read on.