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Insurers Ask Lawmakers to Find Funds to Close Health Law Gap

By Kerry Young, CQ Roll Call

October 5, 2015 -- The Obama administration may need the help of congressional Republicans to shore up a risk management program established by the 2010 health care law. The program is already running a $2.5 billion shortfall that may otherwise land on insurers.

Sen. Marco Rubio and GOP colleagues, who last December narrowed the administration’s room to maneuver to close the gap in the insurer-funded program, are now seeking to build on that by forcing insurers to adjust prices to reflect costs.   

Their approach could not only determine whether insurance companies receive billions of dollars they would be entitled to under the program, but Rubio and his colleagues are also proposing legislation that could lay the groundwork to make the health care law become more market-oriented.

“Taxpayers should never have to bail out health insurance companies that lose money under ObamaCare, and now we need to take that option off the table for good by passing my legislation to repeal the risk corridor provision,” Rubio said in statement Friday.

At issue are payments in the risk-corridor program established by the 2010 law (PL 111-148, PL 111-152). The three-year program is designed to take money from health insurers with relatively low costs and distribute it to those with higher costs. The program is intended to level out insurers’ performance in the start-up phase of new health exchanges. The law bars the insurers from pegging costs to the expected health of customers.

In practice, however, the program didn’t receive enough from the low-cost insurers to meet the claims of the high-cost insurers.  The gap in 2014 was about $2.5 billion, according to the Centers for Medicare and Medicaid, which administers the program, said last week. Insurers were contributing $326 million to the program and claiming $2.87 billion.

Florida’s Rubio and Louisiana’s Bill Cassidy, who was then in the House and is now in the Senate, helped get language into the fiscal 2015 spending package (PL 113-235) that blocks money from major Medicare trust funds or appropriated accounts from covering a shortfall in the risk corridor program.

The provision appears to have forced the Department of Health and Human Services to pay insurers only a fraction—less than 13 cents of each $1–claimed through the risk corridor program this year.  CMS is expected to ask lawmakers to close the gap. The insurers’ trade group has already made the request.

Rubio this year is taking on the program through two bills. He introduced a measure (S 123) that would repeal the section of the 2010 law that created the risk corridor program. But he is also the chief co-sponsor of a bill (S 359) introduced by Cassidy would leave the program in place, but would amend the 2010 law to say funding can only come from payments by insurers.

“The administration has a vested interest in having the taxpayers bail out insurance companies because it keeps premiums lower,” Cassidy told CQ Roll Call in a Sept. 30 interview, adding that that approach masks the costs of the coverage.

Cassidy, a physician who helped found a community health clinic, says the risk-corridor program plays an important role in health care and wants the mechanism preserved. But he also said he doesn’t want some insurance companies drawing funds from the program because they didn’t properly assess risk.

“We should not allow a rogue insurance company to cherry-pick the well as the expense of an insurance company that does it right and takes all comers, so I am in favor of some sort of risk adjustment,” Cassidy said.

Cassidy’s bill would direct the HHS to proportionately decrease payments in a shortfall. The Centers for Medicare and Medicaid Services, constrained by the provision passed last December, have done that in its first set of payments.

A CMS official speaking on background on Thursday said that there could be “some isolated solvency and liquidity challenges for a small number of issuers,” and that the agency will work with state insurance regulators in case of disruptions.  

Health Republic Insurance of New York, one of the largest of the new non-profit insurance cooperatives established after the 2010 law with more than 100,000 customers, began winding down last week. An official said the reduced payments were a factor.

The insurance industry is unhappy with a payments decision that may leave companies and non-profit groups facing losses.

“Stable, affordable coverage for consumers depends on adequate funding of the risk corridor program,” said Marilyn Tavenner, president and chief executive of America’s Health Insurance Plans, a trade group that represents the insurers.  “It’s essential that Congress and CMS act to ensure the program works as designed and consumers are protected.”

Tavenner, who was the administrator of CMS until February and joined the group in July, has urged Congress to address the shortfall.

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