While pent-up demand and new individual customers have contributed to higher-than-hoped-for premium increases, extraordinary claims have been less than feared, leaving some more money to spread around.
The Department of Health and Human Services was "pleased to announce" that the national coinsurance rate for the transitional reinsurance program's 2014 benefit year will be increased from 80 percent to 100 percent for eligible individual market plans. The covered costs are for claims in between $45,000 and $250,000, and payments will be coming in August, the agency said.
Initially, HHS set the reinsurance program's coinsurance rate at 80 percent, on the expectation that requests from insurers for high claims would consume most or even more than the $9.7 billion set to be collected.
Now, HHS and CMS said, requests from insurers for reinsurance payouts were less than anticipated, so claims between $45,000 and $250,000 can be covered at 100 percent. Insurers will be told how much they'll receive before the Independence Day holiday weekend.
"This should be good news for insurers, many of which have been anticipating receiving less in risk corridor programs than they had hoped for because Congress has limited payments under that program to the funds that are actually collected from insurers," wrote Washington and Lee law professor Timothy Jost, in Health Affairs. "It also indicates, moreover, that insurers have been receiving fewer high-cost claims than had been anticipated, which should help them to stabilize premiums."
There is one hitch that some critics may latch onto, Jost noted. The reinsurance program was supposed to collect some $2 billion for the federal treasury to help cover administrative costs. CMS decided that this would be paid only if enough was collected to first distribute $10 billion for reinsurance claims. The agency later acknowledges that its reinsurance levy of $63 per covered life was not enough to meet the $12 billion goal and that some plans had failed to pay some of what they owed.
Early on, it was clear to the Commonwealth Fund and others that the ACA's 3R's helped keep premiums down in 2014 and moderated likely increases in 2015. But going forward, with risk corridors and reinsurance winding down, it will remain to be seen if the permanent risk adjustment program will be enough to share risk and moderate premiums.