CMS pays $8 billion in reinsurance program to keep high-risk covered

For the 2014 benefit year, over $7.9 billion in reinsurance payments will be made to 437 issuers nationwide.

The Centers for Medicare & Medicaid Services is spending close to $8 billion in payments to issuers with exceptionally high costs, the agency said on Wednesday.

Preliminary analysis shows the reinsurance program is working as intended by compensating issuers that enroll higher risk individuals, CMS said.

For the 2014 benefit year, over $7.9 billion in reinsurance payments will be made to 437 issuers nationwide, CMS said.

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The risk adjustment transfers cover higher-cost and higher-risk populations to more evenly spread the financial risk borne by issuers and to help stabilize premiums.

Beginning with plan years that begin in 2014, the Affordable Care Act provides that non-grandfathered plans in the individual and small group markets can no longer discriminate against enrollees due to their health status.

Individuals with pre-existing conditions or chronic illnesses generally can no longer be charged higher premiums by plans in these markets based on their health status.

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The reinsurance program, which started in the 2014 benefit year, is designed to provide issuers with greater payment stability, both for the Marketplace and outside of the Marketplace, as the insurance market reforms are implemented and the Marketplaces facilitate increased enrollment.

More than 99 percent of issuers who set up digital data processing tools called Edge servers successfully submitted the data necessary to calculate reinsurance payments and risk adjustment transfers, according to the report on transitional reinsurance payments and permanent risk adjustment transfers for the 2014 benefit year.

As announced on June 17, for the 2014 benefit year, reinsurance contributions exceeded the requests for reinsurance payments; therefore the coinsurance rate was increased from 80 to 100 percent.

Twitter: @SusanMorseHFN