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Feds cut ACA reinsurance cost coverage percentage

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A major Affordable Care Act training wheels program for health insurers will be a little less generous for 2015 than it has to be, according to federal ACA regulations, but much less generous than the program was for 2014.

Officials at the Center for Consumer Information & Insurance Oversight have described how the program, the ACA reinsurance, will work for the 2015 benefit year in a memo posted late Friday.

The ACA reinsurance program will pay 55.1 percent of the eligible insurer costs for 2015, center officials say in the memo.

The U.S. Department of Health and Human Services, the center’s parent, said when it set up the reinsurance program that the program would pay 50 percent of the covered health insurer costs for 2015.

For 2014, however, the reinsurance program paid 100 percent of covered insurer costs, after the department said the program would pay just 80 percent of covered costs for 2014.

Related: Feds post PPACA lifeboat program numbers

The ACA eliminated or limited most of the defenses, such as refusals to sell coverage to people with heart disease or diabetes, that health insurers once used to protect themselves against claim risk. Many of the ACA limits on insurers’ defenses took effect in January.

Reinsurance protection

To persuade insurers to continue to write individual health insurance in 2014 and later years in spite of the rule changes, ACA drafters include three “risk management” programs.

The reinsurance protection is supposed to use a broad-based fee on most coverage providers to help issuers of individual coverage pay the bills for enrollees who suffer catastrophic losses in 2014, 2015 or 2016.

Health and Human Services has said in the past that the program will pay at least 50 percent of the costs for an individual who has covered medical bills over an “attachment point,” or reinsurance deductible, of $45,000 and below a maximum of $250,000.

The department decided early on that the reinsurance program would cover only blocks of individual major medical policies that complied fully with ACA rules. Many states decided to let individual policies written after the ACA was signed into law and before Jan. 1, 2014, stay in force in 2014. The large number of pre-ACA individual policies that stayed in force in 2014, without access to the ACA reinsurance program, helped down ACA reinsurance program obligations for 2014.

In February, Health and Human Services had $1.7 billion in reinsurance program cash left over from the 2014 benefit year, and it has already collected about $5.5 billion in program cash for 2015, officials say in the new memo.

Also in the memo, officials say:

  • The department expects to collect another $1 billion by Nov. 15.

  • The department will give each eligible issuer an estimate of the amount the issuer can expect to receive for 2015 June 30.

  • The department sent early partial reinsurance program payments to some issuers this spring, and the department will deduct the partial payments from the payment totals for 2015.

Section 1341 of the ACA, the provision of the law that created the reinsurance program, states that reinsurance program managers will send $2 billion in reinsurance program proceeds to the U.S. Treasury for 2014, $2 billion for 2015 and $1 billion in 2016.

Members of the House Energy and Commerce Committee have said they believe the program should make the payments to the Treasury before making payments to insurers.

Officials at the insurance oversight center do not mention that dispute in their memo.


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