Amid ongoing debate in Congress about the future of the Affordable Care Act, state experts are weighing in on the economics of what’s happened with it so far.
When implemented in 2014, the ACA established a funding system to help initially offset some of insurance companies’ losses.
Insurance companies doing well would contribute money – called ‘risk corridor payments’ – to offset losses suffered by companies that didn’t do so well.
But Congress added a caveat: the system had to fund itself. And because losses were higher than expected across the board while insurance markets adjusted, many companies - including Highmark Blue Cross Blue Shield of Delaware – didn’t receive risk corridor payments.
Delaware Insurance Commissioner Trinidad Navarro says that was a major factor in rising insurance rates.
“The rates went up significantly, and there's a correlation between the rate increase and the elimination of the risk corridor payments," Navarro said. "This is significant – the timing was significant.”
While Highmark’s regional losses (for Delaware, West Virginia and part of Pennsylvania) have dropped significantly since 2014 – with $180 million in projected losses for 2016 compared to $773 million for 2014 and 2015 combined - the company is suing the federal government over more than $200 million in risk corridor payments it didn’t receive.
But University of Delaware economics professor Matthew White notes there’s another factor still at work driving premiums up: cost share reduction payments.
“The risk corridors program was temporary and expired at the end of 2016, whereas the cost sharing reduction payments are supposed to be ongoing into the future," White said. "That’s what’s creating uncertainty in setting premiums.”
The future of these subsidies - designed to offset healthcare costs for low-income individuals – are now a focal point of debate between members of Congress.
“This is supposed to continue into perpetuity – and that’s where you get into a situation where insurers hare having to choose premiums without knowing what their revenue structure will be, whether these payments from the government will come through," White said. "And that’s just being decided on a month to month basis by Donald Trump.”