CMS: No risk corridor funding for 2015

Insurers requesting risk corridor payments to cover losses on the exchanges in 2015 won’t get any money, with CMS saying all the funding available will be put toward the existing shortfall for the 2014 benefit year.

The risk corridor program was one of several programs within the Affordable Care Act to limit insurers’ losses in the first years of open enrollment. For three years, insurers would either collect or pay into the program, depending on the difference between their allowable costs (such as claims) and their premiums minus administrative expenses, including profit.

In its first year, however, CMS said it could only pay 12.6 percent of what insurers had requested after congressional funding for HHS required the program to be “budget neutral.” Insurers like Highmark have sued over the reduced payments and the move has been blamed for the failure of several ACA co-ops.

The agency said in a Sept. 9 memo that the 2014 shortfall will take priority over 2015 payments.

“Risk corridors submissions are still undergoing review and complete information on payments and charges for the 2015 benefit year is not available at this time,” the memo said.  However, based on our preliminary analysis, HHS anticipates that all 2015 benefit year collections will be used towards remaining 2014 benefit year risk corridors payments, and no funds will be available at this time for 2015 benefit year risk corridors payments.”

The memo went on to say funds collected for the 2016 benefit year may be needed to cover more of the 2014 shortfall and then whatever remains would be used on 2015 and 2016 payments.

In 2014, insurers requested $2.9 billion in risk corridor payments while about $362 million was collected. If shortfalls continue, the CMS memo said the agency would try to find another funding source, including working with Congress, while recognizing the ACA requires “full payment to issuers.”

The memo did reference the lawsuits from insurers over the reduced payments and said the agency is open to settlement talks.

“We know that a number of issuers have sued in federal court seeking to obtain the risk corridors amounts that have not been paid to date. As in any lawsuit, the Department of Justice is vigorously defending those claims on behalf of the United States. However, as in all cases where there is litigation risk, we are open to discussing resolution of those claims. We are willing to begin such discussions at any time,” CMS said.