A Guide to Obamacare's Backstop for Anxious Insurance Companies

When President Obama said last week that insurers could extend for another year health plans that fall short of the Affordable Care Act’s minimum standards, actuaries had “an old-fashioned freakout,” says Elaine Corrough, a fellow of the Society of Actuaries who consults with health insurers. The reversal, a response to public anger over a wave of cancellations this fall, added another layer of uncertainty for insurers already unclear about whether they will collect enough in premiums next year to cover medical claims.

The White House told insurers not to sweat it. “Though this transitional policy was not anticipated by health insurance issuers when setting rates for 2014, the risk corridor program should help ameliorate unanticipated changes in premium revenue,” wrote Gary Cohen, the Health and Human Services official overseeing much of the health law’s implementation, in a letter (PDF) to insurance regulators. He suggested the program could be modified to soften the blow.