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Life Health > Health Insurance

PPACA reinsurance total may be 19% below goal

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Officials at the Centers for Medicare & Medicaid Services (CMS) say one of the three major Patient Protection and Affordable Care Act (PPACA) risk management programs is on track to collect about $6.5 billion of the $8 billion PPACA calls for it to collect for the 2015 benefit year.

Even though 2015 collections may be about 19 percent short of the PPACA statutory goal, the program has about $1.7 billion in cash left over from the 2014 benefit year, and that should bring the total amount of cash available for 2015 to $7.7 billion, or about 96 percent of the original statutory goal, according to a new memo from the Center for Consumer Information & Insurance Oversight (CCIIO).

CMS is the arm of the U.S. Department of Health and Human Services (HHS) in charge of HHS management of PPACA programs. CCIIO is the CMS division in charge of PPACA programs that affect the commercial health insurance market.

PPACA drafters developed the reinsurance program to protect issuers of PPACA-compliant individual coverage against the effects of PPACA underwriting rules and benefits mandates that took effect in January 2014. The program is supposed to collect a flat amount per enrollee from most types of coverage providers for 2014, 2015 and 2016, then use the cash to help pay the bills of individual coverage holders who have catastrophic claims in 2014, 2015 or 2016.

PPACA reinsurance program rules let coverage providers choose between making one payment for a benefit year and paying their reinsurance bills in two installments.

CCIIO says coverage providers have already made $5.5 billion in reinsurance program payments for 2015. Providers should pay another $1 billion by Nov. 15.

PPACA requires coverage providers to make $12 billion in reinsurance payments for the 2014 benefit year, $8 billion in payments for 2015, and $5 billion for 2016. PPACA drafters hoped the program would generate profits that the U.S. Treasury could use to reduce the federal budget deficit.

In April 2015, CCIIO officials said they thought coverage providers would pay about $9.7 billion in reinsurance payments for 2014, or about 83 percent of the $12 billion statutory goal for 2014. In the new memo, officials do not say how much the reinsurance program ended up collecting for 2014.

See also: Feds post PPACA reinsurance program data

For 2015, the reinsurance program has already collected $5.5 billion from coverage providers. The program could collect about $1 billion in second-installment payments by Nov. 15.

CCIIO has published the news about the 2015 reinsurance program cash total as it is trying to persuade insurers to sell qualified health plans (QHPs) through the PPACA public exchange system in 2017, and as it is preparing to bring the QHP issuers to its offices for what could be an emotional meeting about another PPACA insurer risk management program, the PPACA risk-adjustment program.

See also: CMS schedules PPACA risk-adjustment clash

The PPACA reinsurance program is one of the PPACA “three R’s” risk-management programs.

The other two programs are a temporary risk corridors program — which is supposed to use cash from thriving exchange plan issuers to help struggling issuers in 2014, 2015 and 2016 — and a permanent risk-adjustment program — which is supposed to use cash from plans with relatively low-risk enrollees to help plans that seem to have more than their fair share of high-risk enrollees.

CMS officials told insurers in October that the risk corridors may take in only enough cash to pay 13 percent of its risk corridors program obligations for 2014.

Executives at UnitedHealth Group Inc. (NYSE:UNH) implied in a hearing in New York state that, because of health carrier failures and withdrawals, risk-adjustment programs may be having trouble with collections in some states.

Although the PPACA reinsurance program collections may be lower than the statutory goal, CMS helped hold down 2014 benefit year program obligations by limiting access to the program to fully PPACA-compliant individual coverage arrangements.

In 2014, many of the consumers with individual coverage still had “grandfathered” or “grandmothered” policies that did not meet the PPACA standards that took effect in 2014. The PPACA reinsurance program did not have to help pay the bills of consumers who used the grandmothered and grandfathered policies to pay catastrophic claims.

CCIIO officials say in the new memo that HHS will make an early, partial reinsurance program benefits payment for 2015 available to eligible plans starting in March. HHS will announce the final reinsurance benefits payment amount for 2015 on June 30, CCIIO says.

See also: 

What if you owe the PPACA 3R’s programs money?

Analysts: 10 states had preliminary 2014 individual MLRs over 100%


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