Obamacare Proposal Boosts Payments to Insurers for Sicker Policyholders

November 27, 2013

The U.S. government is proposing compensation to help insurers participating in Obamacare health exchanges who fear that their costs will spin out of control if their plans are dominated by sicker people.

Fears about cost burdens from sicker patients increased when President Barack Obama introduced a “fix” to fulfill his promise to let people who like their existing insurance plans keep them.

The exchanges were created as part of Obama’s healthcare reform law, popularly known as Obamacare. An estimated 7 million people are expected to sign up in the first year. Insurance went on sale on Oct. 1 and goes into effect on Jan. 1.

The law also set new standards for health insurance that millions of existing policies did not meet, causing companies to send cancellation notices that critics said broke Obama’s long-standing promise that people could keep their policies.

The so-called fix announced earlier will let companies continue to offer these otherwise non-compliant policies for a year.

Those individual market policies are believed to be held by healthier people, who may now be less likely to sign up for policies sold through the exchanges, overloading them with costlier consumers.

Under the change proposed late Monday, the government would lower the threshold for reimbursement to insurers for expensive medical claims.

Under existing rules, the government can pay insurers 80 percent of claims greater than $60,000 for an individual in 2014. That threshold would be lowered to $45,000 under the proposal.

In addition, the government proposed altering the “risk corridor” program, which compensates insurers if they spend more on medical claims than they take in from plan premiums.

The public has 30 days to comment on the proposed changes.

About 15 million people buy their own insurance in the United States, and an estimated few million plans were due to be canceled either at the end of this year or in 2014. More than 150 million people buy health insurance through their employers and are not affected.

States have been mixed on whether they will move forward with renewing these policies as now permitted by Obama’s fix.

America’s Health Insurance Plans, a trade group, which initially thought Obama’s plan would destabilize the new exchange market and raise premiums, welcomed the proposal.

“We appreciate that the administration is taking steps to stabilize the market and minimize disruption for consumers,” spokesman Robert Zirkelbach said on Tuesday.

Insurers had spelled out their concerns about the plan cancellations and suggested changes in a hastily called meeting of executives at the White House on Nov. 15, one day after the president announced the move.

The chief executive of Molina Healthcare Inc, which is offering plans on exchanges in nine states, said the move showed the government’s desire to appease insurers.

“I think was a nice gesture on the part of the government,” CEO J. Mario Molina said. “I don’t know if it’s going to make a huge difference overall, but I think this was a way for the administration of saying, ‘We recognize your concerns. We’ll meet you halfway. And please continue to reach out to the uninsured.'”

Other insurers offering plans on the state-based exchanges include Aetna Inc., Humana Inc, WellPoint Inc. , Cigna Corp., and UnitedHealth Inc.

Topics Carriers Policyholder

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