Plan unveiled to avoid health-law ‘insurer bailout’

Washington Post

WASHINGTON – The Obama administration has offered a plan for funding the health-care law’s “risk corridors, ” a program meant to shield insurers from major losses.

The provision, a temporary program lasting through 2016, basically limits how much a health plan can lose or make in the Affordable Care Act health insurance marketplaces in the first three years. It’s one of three programs included in the law intended to ease insurers’ transition to health insurance exchanges.

Insurers are dealing with a new population of enrollees who, because of the law’s provisions, can’t be denied insurance or charged more based on a preexisting condition. So insurers may have trouble pricing their plans early on.

The risk-corridor program is funded by money the government collects from insurers. It is then redistributed to health plans that had a greater share of sicker enrollees. The more that claims exceed an insurer’s expectations (by at least 3 percent), the more it receives back from the risk-corridor program.

Opponents of the health-care law have argued that the feds would have to dip into taxpayer money if the program didn’t collect enough from insurers to cover risk-corridor costs.

The administration rejects charges of an insurer bailout, saying it intends to implement the risk corridors in a “budget neutral” way. In other words, the program won’t take in more money than it needs, and it won’t struggle to pay out to eligible insurers.