A big new Patient Protection and Affordable Care Act (PPACA) insurer protection program may have problems, and some insurers that were hoping to get money from the program may have problems, but those problems are not Standard & Poor’s Ratings Services (S&P) problems.
Joseph Marinucci, a health insurance rating analyst at S&P, gave that assessment today during an S&P health care outlook webcast.
Marinucci talked briefly about the PPACA “three R’s” risk-management programs — a temporary reinsurance program that’s supposed to use money from a broad-based assessment to pay some of the claims of holders of PPACA-compliant individual policies who have catastrophic medical expenses in 2014, 2015 and 2016; a temporary risk corridors program that’s supposed to use cash from successful PPACA exchange plan issuers to help PPACA exchange plan issuers with poor operating results in 2014, 2015, and 2016; and a risk-adjustment program that’s supposed to shift cash from plans with relatively low-risk enrollees to plans with relatively high-risk enrollees.
The reinsurance program, the biggest of the three R’s programs, could have paid eligible insurers as little as $5 billion, but it will actually pay out about $8 billion, Marinucci said.
“That’s a favorable outcome,” Marinucci said.
The risk corridors program, in contrast, “is very much unbalanced,” Marinucci said.
But the health insurers S&P rates all recognized that the program could have problems, and “the credit implications are relatively modest for our portfolio,” he said.
Marinucci said the big health insurers knew going in that they would have to accept losses for several years while waiting for the PPACA individual market risk pool to mature.
“Everyone wants to be there in year five,” Marinucci said.
Also during the webcast, hospital analysts said the entities they rate have been pleasantly surprised by the effects of PPACA coverage expansion programs on the amount of revenue they get per service provided.
Some had feared that patients with new Medicaid or PPACA exchange plan coverage might depress payment rates, but PPACA seems to be having little effect on payment rates, or moderately increasing payment rates, not cutting them, the analysts said.