What's inside that PPACA risk corridors program box?

Drafters of the Patient Protection and Affordable Care Act (PPACA) created the risk corridors program in an effort to protect health insurers against PPACA public exchange startup problems. The program is supposed to use cash from exchange plan issuers that do well in 2014, 2015 and 2016 to help exchange plan issuers that do poorly in those years.

Insurers originally thought the U.S. Department of Health and Human Services (HHS) could put in money if the program ran out of cash. In December 2014, after insurers had been selling coverage through the PPACA exchange system for more than a year, Republicans put a provision requiring HHS to get all risk corridors program cash from exchange plan issuers in the bill that created the Consolidated and Further Continuing Appropriations Act of 2015.

Deep Banerjee, an analyst at Standard & Poor’s Ratings Services, estimated in January that the risk corridors program might generate only enough cash to meet about 10 percent of its obligations.

HHS officials never publicly acknowledged that the program would face a shortfall until early October, when they told states that the program might collect only enough cash from thriving insurers to pay about $362 million, or 13 percent, of the program’s $2.9 billion in 2014 obligations.

Insurance regulators have said that they had trouble understanding how big the shortfall might be, in part because some insurers that assumed the risk corridors program would fail left risk corridors program receivables out of their quarterly financial reports.