Affordable Care Act aid could take years to reach insurers
Highmark had anticipated receiving over $200M relief in ’14
October 8, 2015 12:00 AM
Companies, including Downtown-based insurer Highmark, want about $2.87 billion to help cover their first-year losses from online insurance marketplaces.
By Adam Smeltz / Pittsburgh Post-Gazette
Health insurers that lost millions of dollars last year under the Affordable Care Act may wait years for the government to deliver the aid it promised them.
Companies, including Downtown-based insurer Highmark, want about $2.87 billion to help cover their first-year losses from online insurance marketplaces — a centerpiece of the landmark health care law. But a federal relief program meant to limit their risk is more than $2 billion short, leaving the companies to collect only 12.6 percent of those requests late this year, the Centers for Medicare & Medicaid Services said this month.
The federal agency hopes to make up the shortfall in the next year or two, as insurers learn from experience, fine-tune their pricing and sign up more customers.
Highmark had anticipated receiving more than $200 million through the relief program, known as risk corridors, for 2014. Its operating losses from marketplace policies climbed to about $318 million for the first half of 2015, fueled by heavier-than-forecast claims from new enrollees.
“We are still evaluating the risk-corridor announcement, and we will continue to have conversations with government officials to better understand the situation,” Highmark spokesman Aaron Billger said in a statement. “Proper funding of the risk-corridor program is imperative to ensure affordable coverage and stabilize the health insurance market to protect consumers.”
The company, the biggest health insurer in Pennsylvania, has not included the 2014 risk-corridor payments in revenue projections and is already maneuvering to curb future losses, Mr. Billger said. In a briefing last week, executives said they would narrow the number of Highmark insurance plans sold in the marketplaces next year and rethink their approach to those enrollees.
Their parent group, the nonprofit Highmark Health, booked total revenues of more than $17 billion last year.
Downtown-based UPMC Health Plan, the No. 2 health insurer in Western Pennsylvania, had a “very small” marketplace business last year and expects “an immaterial” risk-corridor payment, spokeswoman Gina Pferdehirt said in a statement. She said the federal government has not specified an amount.
Marketplaces available through Healthcare.gov went online in late 2013, creating a venue where consumers can shop for insurance plans that meet the government’s requirements. An individual coverage mandate under the law took effect in 2014.
To encourage insurers to join the exchanges, the program offered a three-year cushion: Participating companies could pay into the temporary program if their premiums exceeded customers’ claims, and companies whose claims outpaced premiums could collect payouts to offset losses.
The approach left the the program with a roughly $2.5 billion shortfall for 2014, when contributions reached around $362 million. Overseers have not said how many companies are seeking reimbursements or made payments under the plan, which is one of several public programs meant to help insurers acclimate to the law.
Analysts expect any deficits for 2015 and 2016 will diminish as insurers refine their business models and enrollments evolve. Federal officials will use collections from 2015 — and perhaps 2016 — to cover unpaid requests from 2014, they said in a statement.
They may approach Congress for more money if the deficits persist into 2017, according to the statement.
“It’s essential that Congress and [Medicare officials] act to ensure the program works as designed and consumers are protected,” said Marilyn Tavenner, president of America’s Health Insurance Plans, in a statement.
In the meantime, marketplace customers shouldn’t feel any immediate effects, said Larry Levitt, a senior vice president at the Kaiser Family Foundation in Menlo Park, Calif. He said companies had already planned policy premiums for the 2016 open-enrollment period that begins Nov. 1.
“Insurers are still going to set their premiums with the expectation of making money, even if they don’t expect full payments under the risk-corridor program,” he said. Smaller insurers and those more dependent on marketplace business could take a bigger hit from unpaid reimbursements, although it’s tough to gauge the effect on them right now, he said.
“Insurers have made a long-run bet on the marketplaces, expecting that enrollment will grow and that the market will eventually turn profitable,” Mr. Levitt said.
Adam Smeltz: email@example.com, 412-263-2625 or on Twitter @asmeltz.
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