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February 11, 2016 11:00 PM

CMS readies $7.7 billion for ACA reinsurance payouts

Bob Herman
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    Health insurers that sold plans on the exchanges in 2015 and enrolled droves of high-cost members, could haul away as much as $7.7 billion this year, as part of the healthcare law's reinsurance program.

    The CMS released a memo (PDF) late Friday that said the agency expects its jar of reinsurance money will total $7.7 billion. The payouts, to be issued this year, will reflect data from the 2015 benefit year.

    The Affordable Care Act created the temporary, three-year reinsurance program to protect insurers during the early years of the new individual marketplaces. Insurers pay into the reinsurance pool, and those funds are then paid out to health plans that had members with extremely high medical claims. Last year, the CMS raised the program's payout rate because it received more money than payment requests.

    So far, the CMS has collected $5.5 billion from insurance companies for reinsurance, and will collect another $1 billion later this year. After adding in $1.7 billion in unused reinsurance funds from last year, the CMS has $8.2 billion at its disposal for the program. However, $500 million of that total is required by law to go to the U.S. Treasury as an operating expense, giving the agency a final total of $7.7 billion.

    The CMS paid out $7.9 billion under the reinsurance program last year for the 2014 benefit year. Just three California insurers—Anthem, Blue Shield of California and Kaiser Permanente—raked in more than $1 billion of reinsurance payments combined.

    Early analysis from some insurers, such as Blue Cross and Blue Shield plans and the not-for-profit co-ops, indicates that reinsurance payouts will be sorely needed because of an adverse risk pool.

    The CMS did not release any details about payments for risk corridors or risk adjustment, the ACA's two other insurance-payment programs. Congress handcuffed the risk-corridors program again for 2015, requiring all payments to be budget-neutral.

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          • - Luminaries
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          • - Top 25 Women Leaders
          • - Women to Watch
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        • Digital Health Transformation Summit
        • ESG: The Implementation Imperative Summit
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        • Social Determinants of Health Symposium
        • Women Leaders in Healthcare Conference
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        • Top 25 Women Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Hospital at Home
        • - Workplace of the Future
        • - AI and Digital Health
        • - Future of Staffing
        • - Hospital of the Future (Fall)
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