UPDATED x2: Well this doesn't sound good..."S&P sees PPACA risk corridors program funding gap"
Analysts at Standard & Poor's Ratings Services say the effects of funding restrictions on the Patient Protection and Affordable Care Act (PPACA) risk corridors program may cause the program to hurt small and midsize health insurers.
Drafters of PPACA created the risk corridors program in an effort to make selling health insurance under PPACA rules less risky, by using cash from health insurers with good underwriting results for 2014, 2015 and 2016 to help insurers that get poor results for those years.
I'm no expert on the "risk corridors" thing, but as far as I can tell, it effectively amounts to an insurance program for insurance companies. Basically, regardless of whether anyone supported or opposed the ACA when it was implemented, everyone agreed that there was a lot of uncertainty about how all the different moving parts might play out. As a result, one of the concessions given to the insurance industry was that a fund was set up in which all of the private insurers would pony up some cash into a central pool to help cushion the blow to the companies which lost money during the first 3 years of the ACA exchanges. This, in turn, helps spread the risk (sound familiar?) and encouraged companies which otherwise might be reluctant to participate in exchange QHPs to go ahead and jump in the pool, as well as keeping premiums from spiking dramatically while the law found it's footing.
What S&P is saying here appears to be that the companies which lost money seem to have significantly outweighed the ones which did well:
Deep Banerjee and other S&P analysts say in a new commentary that health insurers with good results for 2014 may pay in enough cash to cover only about 10 percent of the "receivables," or money that insurers with poor results are hoping to receive.
Of course, this wouldn't be as big of an issue if the GOP hadn't insisted on cutting off the "risk corridor" program at the knees last year, and then again this past winter:
Congress later put a provision prohibiting HHS from using taxpayer money to fund the risk corridors program in a government funding bill. President Obama signed the bill into law in December 2014.
Sens. Bill Cassidy (R-La.) and Marco Rubio (R-Fla.) introduced legislation Wednesday to make risk corridors budget-neutral. A similar bill from Cassidy was included in the federal spending package passed in December, though the requirement would only apply for one year.
The results of these developments could be minor or major, depending on things shake out. It's possible that this is already being reflected in Oregon, where *requested* 2016 rate increases are averaging about 23% initially. From Nick Budnick's article in the Oregonian:
While better data explains some of the rate changes, less government subsidy likely also plays a role. A state-federal program intended to ease losses from high-dollar claims in order to curb rate hikes in the individual market is starting to ramp down. The program resulted in 2014 premiums being about 15 percent less than they otherwise would have, state officials said.
UPDATE: OK, both rebeccastob (via Twitter) and Richard Mayhew (in comments) have explained that in Oregon's case, it's actually the "reinsurance" program at play, which is a different provision from the one Standard & Poors is referring to. I'll be posting a more detailed explaination of the "Three R's" directly from Rebecca later today (this subject is way beyond my pay grade to understand in detail).