Risk Adjustments in ObamaCare

[somarco]

the IFP market is almost always going to be a loser for the carrier now.

Reminds me of something my manager said when I was a MONY group ins rep. This was at a time when most of the large group was dividend/refund.

"I don't know why anyone would write group insurance. If we make money we give it back (dividend). If we lose, we hope they renew so maybe we can recoup. If the don't renew, oh well."

 

[smokin goose]

At first glance I thought the title of this thread said, "Rick adjustments in Obamacare."

Lol. Now that's funny.

 

[AllenChicago]

Carriers are hopping mad that HHS (Hate-Hurt-Screw) is demanding many millions of dollars in re-insurance contributions before November 30, 2015, after only paying peanuts (12.6% of what was expected) to the carriers this year, from their 2014 contributions. Almost every health insurer is paying in, more than they are/will be receiving. They're surprised that D.C. is doing to them, what they've done to customers for decades?!


For those who don't know, carriers have right up until December 31st to exit the Federal or State Exchanges. They have to stay away for 5 years, but after this hell, I doubt if they give a snap.

 

[AllenChicago]

February 16, 2016

I can't (and don't try to) understand the 3 ACA programs that are designed to offset health insurers' risk and losses, but one appears to be doing A-OK.

Story: HHS Reinsurance Payments to Be $7.7B for 2015 Benefit Year | Bloomberg BNA

I wonder if the $7.7 Billion is enough keep squeamish carriers participating in the Exchanges for 2017?

 

[RayNY]

Some footnotes:

$8.2B total, minus $0.5B for administrative costs, reduced from $8.4B just a few months ago.

$1.7B collected in 2014
$5.5B collected in 2015
$1.0B still outstanding at the time of the article.

This money comes from the "per-life" fee, aka, a tax on health insurance premium levied on policyholders. This is basically money they paid out just to get back, minus the half billion in fees (about 6% admin fee) and their own internal admin costs for collecting/accounting/remitting.

They've anticipated getting this money, it's already been accounted for. It's not a "bonus" or "surprise", just a simple case of "not being screwed this time".

It doesn't even begin to address the missing Risk Corridor money, which is sitting around $2.5B of expected payments that never came to be. Of course, it won't do anything to save the failed insurers, but I expect they get the money they're entitled to regardless...

 

[AllenChicago]

Then its nothing but the government taking insurers money. Collect it from them, take half a billion dollars for yourself, and give the remaining amount back. I think Uncle Sam got this laundering scheme from Bernie Madoff.

 

[RayNY]

In theory, this is basically an indemnity program for high-cost claims, the gov't will cover claims from $45k-100k, acting like coinsurance. The idea is to bolster a company that took on a clients with high-cost claims (not a bad risk profile, that's a different program).

Thing is, same cost, same premium collected, there would be 6% more money at a minimum available to pay these claims if it wasn't sent through the gov't first. Single high claims don't appear to have a pattern, it's exceptional circumstance, not just high need or adverse selection.

 

[sman]

there would be 6% more money at a minimum available to pay these claims if it wasn't sent through the gov't first.

Or to pay brokers a commission.

 

[ActuaryGuy]

I wonder if the $7.7 Billion is enough keep squeamish carriers participating in the Exchanges for 2017?

Not likely, just the opposite since reinsurance goes away in 2017.

In truth, this is one of the more stable elements to deal with, so carriers can account for it in setting 2017 rates. So this specific item should not keep any carrier in or out.

 

[AllenChicago]

Not likely, just the opposite since reinsurance goes away in 2017.

In truth, this is one of the more stable elements to deal with, so carriers can account for it in setting 2017 rates. So this specific item should not keep any carrier in or out.

Thank-you for answering that question, ActuaryGuy. It will be interesting to see which carriers return for more guaranteed financial losses in 2017.