Humana to write off $591 million owed in risk corridor payments

Humana indicated it doesn’t expect to receive the $591 million its owed by the federal government under the risk corridor program of the Affordable Care Act (ACA).

The insurer announced Dec. 8 it’s writing off the amount after a lawsuit by a nonprofit insurer over the same program was tossed out of court.

The risk corridor program was one of several risk mechanisms within the ACA to shield insurers from losses in the early, uncertain years of the insurance exchanges. 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.

After the first year, however, CMS said it could only pay 12.6 percent of what they requested after Congress refused to appropriate the funds necessary to cover extra losses. Humana said it received about $30 million in risk corridor payments as of Sept. 30, 2016, with another $8 million likely to come as CMS continued to pay off what had been requested for 2014 plans.

Humana’s press release said the write-off should keep the unpaid amount from affecting future financial reports.

“The risk corridor premium stabilization program expires on December 31, 2016, so the write-off of these receivables will have no impact on the company’s expected performance for the year ending December 31, 2017. Importantly, risk corridor receivables were not previously allowed as assets for statutory surplus and, therefore, were already fully funded by the parent company,” the press release said.

The missing risk corridor money has been a fatal blow to nonprofit co-ops set up by the ACA. Most recently, Maryland’s Evergreen Health Cooperative cited the $24 million its owed under the program in announcing it would be suspending coverage for 2017.