Cromnibus: Obstacles And Opportunities For Payers

Deep inside the massive short-term spending bill awaiting President Obama’s signature are provisions that could rattle the insurance industry.  The $1 trillion Consolidated and Further Continuing Appropriations Act of 2015 — the “Cromnibus” — contains a handful of regulatory and funding changes for portions of the Affordable Care Act, including budgetary mandates for the risk corridors program, revisions to how the medical cost ratio applies to Blue Cross insurers and cuts to the Medicare Independent Payment Advisory Board.

The provision that could have the most impact on insurers is section 227, prohibiting the Centers for Medicare & Medicaid Services from transferring funds between accounts to pay for the cost-sharing risk corridor program, where regulators collect fees from individual and small group public exchange plans with profit margins above three percent and redistribute them to plans with negative margins under three percent.

The ACA created the temporary risk corridors as part of the “3Rs” market stabilization program, but provided no additional funding for any shortfalls. Preparing to pay out 2014’s risk corridor shares next year, CMS is expecting the program to be budget neutral over its three years, but in event of a shortfall will pay claims proportionally and carry over obligations.  A shortfall could mean some temporary or lingering losses for insurers, who’ve factored risk corridor payments into premiums for 2014 and 2015, as well as their capitalization reporting to state regulators...