OLDWICK, N.J.--(BUSINESS WIRE)--Following the announcement that health insurers will receive 12.6% of the money they are supposed to receive through the Affordable Care Act risk corridors program for 2014, A.M. Best has commented that this payment reduction may have more of a severe impact on small and midsize carriers that selected a strategy of aggressive pricing for their marketplace exchange policies.
The Centers for Medicare and Medicaid Services (CMS) recently announced that insurers are expected to pay to CMS $362 million in risk corridors charges, and the amount of expected payments by CMS to insurers as $2.87 billion. The agency had previously announced that the risk-corridor program would be budget neutral, meaning that its only funding would come from those insurer payments. If risk corridors collected for a particular year were insufficient to cover the full amount of risk corridors payments, the risk corridors payments will be reduced pro rata. As a result, CMS announced that the payment for the risk corridors for 2014 will be prorated to 12.6%.
The latest Best’s Briefing, titled, “A.M. Best Comments on the Centers for Medicare and Medicaid Services’ Risk Corridors Payments for 2014,” states that the increase in the coinsurance rate to 100% from 80% for the 2014 transitional reinsurance program should have decreased the amount of risk corridors payments that was anticipated at year-end. However, this adjustment should have been taken into account when insurers filed with CMS for the risk corridors payment for 2014 and should already be reflected in the $2.87 billion of payments expected to be made by CMS.
Given the large amount of the shortfall, A.M. Best believes the timing and actual amount of the remaining 2014 and full 2015 risk corridors payments are in question. A.M. Best also notes that the reduction in risk corridors payments is likely to have more of a severe impact on small- and mid-size carriers that selected a strategy of aggressive pricing for their marketplace exchange policies.
For the full copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=242258.
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