CMS Sees No 2015 Risk Corridor Payouts But Contemplates Settling Insurer Lawsuits

The Affordable Care Act (ACA) established three premium stabilization programs: the permanent risk adjustment program and the transitional risk corridor and reinsurance programs. These programs were modeled after similar risk sharing programs in the Medicare Part D prescription drug program that have contributed much toward that program's success. They have provided some stability for the first three years of the implementation of the Affordable Care Act's individual and small group market reforms; the reinsurance program is credited with reducing marketplace premiums for 2014 by 10 to 14 percent and for 2015 by 6 to 11 percent.

The risk corridor program was intended to reduce the risk assumed by insurers offering qualified health plans (QHPs) in the marketplaces during its first three years. The program applies a statutory formula to collect funds from QHP insurers that enjoy excessively large profits and to make payments to QHP insurers that suffer exceptionally large losses.

The ACA does not require the risk corridor program to be revenue neutral. But for 2014 and 2015, Congress adopted appropriations riders limiting payments under the program to the amount it collected. For 2014, the Department of Health and Human Services (HHS) received $2.87 billion in claims but collected only $362 million in contributions. It was thus only able to pay 12.6 percent of claims under this revenue neutrality constraint.

CMS had earlier stated that if budget neutrality resulted in a shortfall, it would make up the shortfall in future years. On September 9, CMS announced that, although it has not yet completed review of QHP insurer risk corridor submissions, it has preliminarily concluded 2015 payments will again result in a shortfall. Indeed, all funds collected for 2015 will have to be devoted to paying out 2014 obligations. CMS anticipates collecting risk corridor charges for 2015 this November and making payments in December, the same schedule that it observed last year for 2014 collections and payments. CMS does not expect to have any money left over to make any payments from 2015 collections toward 2015 obligations.

CMS continues to recognize, however, as it has in the past, that risk corridor payments are an obligation of the United States government and that full payment must be made to insurers. HHS commits itself to work with Congress to fund the risk corridor payments to accomplish this. The government will also, however, continue to defend lawsuits that have been brought by insurers in the federal Court of Claims. The government has defended these lawsuits, asserting that full payment is only due at the completion of the program.

The guidance expresses, however, willingness to discuss settlement of those claims given the “litigation risk” that they pose. Given that there is a standing appropriation for Court of Claims judgments, settling these cases may be a way to get funds to health plans owed money under the risk corridor program despite the failure of Congress to fully fund the program.

Coordinating Medicare Coverage With QHP And Other Coverage

Also on September 9, CMS posted at REGTAP.info (registration required) a number of frequently asked questions regarding its Medicare data matching program, under which it is contacting individuals dually enrolled in Medicare and QHP coverage and informing them that they are not eligible for and must terminate advance premium tax credits or cost sharing reduction payments.

The FAQs also review coordination of benefits between Medicare and other forms of coverage. When an individual has both Medicare coverage and another form of coverage, which pays primary and which secondary depends on a host of variables:

• whether the individual is receiving Medicare because he or she is over 65 or because he or she is under age 65 and disabled or enrolled in end state renal dialysis coverage;


• whether the other form of coverage is individual, group, COBRA, Medicaid, Veterans' Affairs, or TRICARE coverage; and,


• if the other form of coverage is group coverage, whether the covered individual is an active employee, a retired employee, or the spouse or dependent of an employee, and also on the size of the employer.

The FAQs review which coverage is primary and which is secondary under these situations. One FAQ notes that plan members should notify their insurers of any other coverage they may have for coordination of benefits purposes.