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GAO reinsurance ruling could cost health insurers $2 billion

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The U.S. Government Accountability Office has agreed with House Republicans in a dispute that could cost issuers of individual health coverage about $2 billion.

Related: House Energy to CMS: You owe Treasury PPACA reinsurance money

The GAO, a congressional watchdog agency, says the U.S. Department of Health and Human Services must pay billions of Affordable Care Act reinsurance program revenue to the Treasury first before making reinsurance program payments to health insurers, according to a new GAO legal ruling.

The text of the Patient Protection and Affordable Care Act of 2010, one of the laws that makes up the ACA package, requires most insurers and health plans to contribute a flat per-enrollee fee to a fund that’s supposed to protect individual health issuers against part of the cost of covering enrollees with catastrophic claims in 2014, 2015 and 2016.

The ACA calls for the program to collect $10 billion for 2014, $6 billion for 2015 and $4 billion for 2016, and to pay $2 billion to  the Treasury for 2014, $2 billion for 2015 and $1 billion for 2016.

The program collected $9.7 billion for 2014 and paid $7.9 billion in reinsurance claims. It kept $1.7 billion to pay 2015 claims.

Program managers expect to collect just $6.5 billion in reinsurance program revenue this year and use the carryover money to increase the payout total to $8.025 billion, according to the GAO.

“HHS may not use amounts collected for the Treasury to make reinsurance payments,” the GAO says.

Reinsurance program managers should pay $2 billion to the Treasury for 2014 before making any program payments for 2015, according to the GAO.

The total cost for insurers could rise to $4 billion if the ruling also cuts payouts for 2015 .


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