Health Law Change Would Protect Insurers' Losses

A change to provisions in the Affordable Care Act (ACA) would allow insurers to receive federal funding for any financial losses they endured due to the health law.
Published Online: May 23, 2014
Katie Sullivan, MA
A change to provisions in the Affordable Care Act (ACA) would allow insurers to receive federal funding for any financial losses they endured due to the health law. The decision, discretely passed amongst other new regulations, is intended to keep 2015 premium increases at a minimum. Health and Human Service (HHS) officials explained that if insurers moderated their rate increases over the next few years but lost money, the government would utilize federal funding to cover their losses. HHS argued that this safety net would prevent insurers from drastically increasing health plan premiums.

“In the unlikely event of a shortfall for the 2015 program year, HHS recognizes that the Affordable Care Act requires the Secretary to make full payments to issuers,” the regulation noted. “In that event, HHS will use other sources of funding for the risk corridor payments, subject to the availability of appropriations.”

Several insurance companies have already filed for their proposed 2015 rate increases. While a number of states have had minimal increases, there are still many others in the early stages of preparing their filings. Customers can expect to see increases as high as nearly 17%, but others many only see a .5% increase.

In Virginia, for example, Humana announced that it expected to raise its premiums by 22.4% next year, while WellPoint would increase its rates 8.5%. Conversely, in Washington State, Molina Healthcare of Washington proposed a premium rate decrease of 6.8%. Still, analysts warn that these forecasted premium changes aren’t set in stone.

“It's still too early to draw conclusions,” said Amy Yao, chief actuary at Blue Shield of California. “I have the best actuarial team in the whole country. Even with that, it's less than 50% confidence” that they'll hit the correct rate setting for 2015, she said.

“We'll see rate increases in the marketplaces, but I think it’s anyone’s guess,” said Sabrina Corlette, project director at the Georgetown University Center on Health Insurance Reforms. “It’s like nailing Jell-O to a wall.”

Health economists said that the 2014 cost trend will be the largest variable in 2015 premium price-setting. If the trend continues, insurers may try to compensate.

Around the Web

Critics Call Obama Funding Plan for Health Insurer Losses a 'Bailout' [Los Angeles Times]

Health Plans Scramble To Calculate 2015 Rates [Kaiser Health News]

Already? Obamacare 2015 Premiums Begin to Roll Out [CNBC]

First Obamacare Premium Notices For 2015 Show Double Digit Increases [Forbes]

One Health Insurer Wants to Cut Rates 6.8 Percent. Another Wants to Hike Them 26 Percent. What Gives? [The Washington Post]

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