For all the talk of competition and strong enrollment in many state exchanges, some markets remain fragile.
The federal risk corridor payments that reimburse exchange plans for unexpectedly high claims have always been controversial. Those payments could soon have an outsized enroll in determining exchange carrier participation.
The gulf between expected and actual payments could be too far for some plans to bridge. In the latest round of risk corridor payment, exchange carriers will receive only 12.6 percent of requested funds - $362 million on $2.87 billion in requests. For nonprofit plans, the pain will come swiftly. The Affordable Care Act does require the Centers for Medicare & Medicaid Services to fully fund those requests, but the timeframe for payment has been stretched out.
Don’t expect Blue plans, Kaiser or publicly traded plans to lose much sleep over those funds. With diversified operations they were always buffered from major exchange losses. Only the New Mexico Blue plan has left its state’s individual exchange, and local factors and demographics played an outsized role in that decision.
For the Medicaid plans that expanded into commercial policies for the first time, the payment issue could be the end of the line. While bigger Medicaid players such as Molina or Centene might have the capital to weather the payment cut, regional Medicaid plans will face taller odds. Most of those plans entered the exchange to attract people whose income disqualifies them for Medicaid. Now, they might not have the dollars to wait out stabilization of exchange markets.
With most bleeding red ink, this could be a deathblow for even more Consumer Oriented and Operated Plans (CO-OPs). CO-OPs in Louisiana, Nevada and New York have already folded for 2016, and the risk corridor cut further amplifies pressure on these new nonprofit plans.
Launched at the same time as the first exchange open enrollment, CO-OPs are intrinsically connected to the marketplaces. Few CO-OPs have substantial business outside the exchanges, so fluctuations in payments could set off a domino effect.
Some CO-OP officials, including those at Colorado HealthOp, say they could have prepared for the risk corridor decline with notice. Now they are left to scramble, and it would be unsurprising if several more scramble directly to insolvency. .
The CMS says all carriers will eventually receive full compensation. That could prove to be cold comfort for carriers forced to end exchange (or all) operations.