Obamacare Risk Fund May Pay Just 10% of Insurer Claims, S&P Says

There may be just $1 in the piggy bank to cover every $10 in claims at an Obamacare program designed to spread risk among insurers, Standard & Poor’s said.

The “risk corridor” program was designed to bolster plans that suffered losses on health-care insurance exchanges, in part by taking funds from those that turned a profit. It was one of three risk-sharing initiatives that help companies adjust to the Affordable Care Act.

Yet companies mostly did poorly in state marketplaces, leaving the amount insurers expect to pay into the program at less than 10 percent of what others expect to get out, S&P found. And a bill passed last year doesn’t let the government use its own funds to make up the difference.

“The only money they can use to pay the insurers who are on the downside is money coming in from insurers who are profitable,” S&P analyst Deep Banerjee said. Most insurers “ended up being on the loss side of the corridor. That’s why we are here.”

The U.S. Centers for Medicare & Medicaid Services hasn’t yet put out final figures on the risk corridor program, S&P said.

The shortfall could mean higher premiums for customers and may threaten the viability of some smaller insurers, Banerjee said. Kentucky Health Cooperative Inc. and Minnesota’s PreferredOne Insurance Co. are counting on receiving a sum of money that exceeds their total regulatory capital, S&P found. Capital, or the excess of assets over liabilities, is a gauge of financial strength that’s monitored by regulators.

More Than Half

In New York, Oscar Insurance Co. and Health Republic Insurance of New York Corp. had risk corridor receivables equal to more than half their capital, as of Dec. 31. Receivables at Moda Health Plan in Oregon and Common Ground Healthcare Cooperative in Wisconsin also topped 50 percent of capital.

CoOportunity Health, an Iowa-based insurance startup formed under Obamacare, already has failed.

Some big insurers also are expecting payments, though the sums are smaller relative to their total size, Banerjee said. Humana Inc. expected to get $110 million under the risk corridor program as of March 31, the company said in a regulatory filing. That’s about 1 percent of the company’s equity, as measured under generally accepted accounting principles. The amount Health Net Inc. was expecting in risk corridor payouts was about 5 percent of its capital as of Dec. 31, S&P said.

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