Health Insurers Get 1.6 Percent of $6 Billion They Are Owed for Costly ACA Customers

Hundreds of insurers selling health plans in Affordable Care Act marketplaces are being paid less than 2 percent of nearly $6 billion the government owes them for covering customers last year with unexpectedly high medical expenses.

The $96 million that insurers will get is just one-fourth of the sum that provoked an industry outcry a year ago, when federal health officials announced that they had enough money to pay health plans only 12.6 percent of what the law entitles them to receive.

This time, the Obama administration made no public announcement.

The Centers for Medicare and Medicaid Services, the agency responsible for carrying out much of the 2010 health-care law, posted an online notice the week before Thanksgiving that included 12 pages of insurers in the ACA marketplaces. Beside each name was a set of dollar amounts.

The notice did not include a total. But a CMS spokesman confirmed that it is 1.6 percent of the $5.9 billion that the government owes.

The figures were issued so little notice that the chief executive of at least one insurer selling ACA coverage said he did not receive official notification — until its small payout sum appeared, without explanation, on a printout from the government that contained routine financial information. The executive spoke on the condition of anonymity to avoid conflict with federal officials.

The extreme scarcity of 2015 money is the latest chapter for a problem-ridden part of the ACA designed to cushion insurers from high-cost customers.

Known as “risk corridors,” the program is one of three strategies embedded in the law to deter insurers from mainly seeking out customers healthy enough that they need little medical care. As it was intended, marketplace insurers with unexpectedly low costs pay into a fund, which is then used to compensate insurers with higher-than-anticipated costs.

The program was designed to run from 2014 through 2016, with the insurers owed money for a given year to be paid the following year.

From the start, it was clear that the money contributed by low-expense plans would not be enough to cover what the others were owed, and the risk corridors were not designed to pay for themselves. Then a political obstacle arose. In a funding bill for 2015, Congress, led by Republican foes of the ACA looking for any weapon they could muster against it, blocked the Obama administration from using any other source of federal money to make up the difference.

A year ago, when CMS officials announced that the 2014 payout would be $362 million of the $2.87 billion owed, they promised to make insurers whole in the future if possible.

In September, CMS said a preliminary analysis showed that the risk-corridor money paid into the fund for 2015 would be used to help offset the 2014 shortage.

The combined shortfall of more than $8 billion in compensation for the two years is among the financial difficulties that many insurers have had with their ACA business. Some major insurers, including United Healthcare and Aetna, have withdrawn from most of their ACA markets for 2017, citing losses from customers who were sicker than they had expected.

Overall, the total that CMS owes in 2015 risk-corridor payments has doubled from the previous year’s total, while the amount chipped in by insurers has fallen by three-quarters.

Of 400 ACA insurers included on the recent CMS list, about 70 percent are owed money, while just 15 percent had low-enough expenses that they had to pay in, according to Deep Banerjee, a Standard & Poor’s credit analyst specializing in health care. The rest were close to their expected costs, so neither owed nor were owed.

“This program was going to be supportive and ended up not being supportive,” Banerjee said.

Insurers are disappointed again, but the risk-corridor problem is being overshadowed by larger tumult as President-elect Donald Trump and the incoming Republican majority in Congress make plans to repeal the law entirely.

Complicating things further are recent developments in lawsuits that several insurers filed against the government in an effort to get their risk-corridor money.

This fall, the Justice Department opened settlement talks with those plans and began exploring a way that all of the insurers due money could be paid before the Obama administration leaves office. But those talks have been slowed by a Court of Federal Claims judge’s ruling last month against a nonprofit Illinois insurer that had sued.

Last week, Humana announced that, because of the court ruling, it was writing off almost all of the $591 million in 2014 risk-corridor money it had been awaiting.

Other insurers are in a particularly odd spot. Molina Health was not due any risk-corridor payment for 2014 but is owed nearly $1.8 million for 2015. Because CMS is devoting all of the latest money to the 2014 shortfall, a Molina spokeswoman said, the insurer will not receive any money at all for its losses last year.

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