The Hidden Reasons Why Obama Care (ACA) is Failing

The true measure of how well the ACA is working should not be measured by how many uninsured people sign up for it.  The press fails to report the deep financial flaws brought about by a congress that passed the ACA for political gain.

One of the most litigated questions under the Affordable Care Act (ACA) is whether the United States government owes health insurers that offered qualified health plans (QHPs) through the ACA’s marketplaces the full amount that would be due them under the formula found in the ACA’s risk corridor statute and regulation. At least 17 cases brought by insurers are now pending in the Court of Federal Claims, one of which has been certified as a class action. An additional case is pending on appeal in the United States Court of Appeals for the Federal Circuit.

Background

The risk corridor program is, along with the risk adjustment and reinsurance programs, one of the Affordable Care Act’s three premium stabilization programs. It was designed to attract normally risk-averse insurers into offering a new product to a new population with uncertain prospects during the first three years of the health insurance marketplaces. It collects contributions from participating insurers that made profits that exceed certain “risk corridors” and makes payments to insurers whose losses fall outside those corridors. It was only in force for 2014, 2015, and 2016.

Nothing in the statutory provision creating the ACA program required it to be revenue neutral. Insurers entered the marketplaces in 2014 believing that risk corridor payments would be made if they were due under the statutory formula regardless of the level of collections. In 2014, however, nine months after health plans had submitted their rates for 2014 and three months after they had begun marketing qualified health plans (QHPs), CMS began to describe the program as budget neutral.

Regardless of HHS assurances and CBO projections, the potential magnitude of risk corridor receipts and payments and the effects on particular insurers and markets is highly uncertain.  The substantial uncertainty facing insurers participating in the exchanges in 2014 has only been partially resolved as they develop rates for 2015.  There remains a real possibility that promised risk corridor payments could significantly exceed receipts for 2014 or later.  If so, payment reductions could be problematic for some insurers, especially for smaller companies and/or new entrants.As it turns out, several insurers are now in court suing CMS for losses.  

Flash forward to 2016-2017.  The final accounting for evaluation of 2016 risk corridor adjustments does not occur until July 2017. The original final notice included budget neutrality while recent comments from HHS avoid that issue in it's forward looking plan for reimbursing insurance companies for their losses.  The scheme is a game of chairs.

Now it may all be moot, since President Trump and the GOP congress are about to repeal/amend the Affordable Care Act.