Reinsurance program to pay out $7.7B for 2015

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The Affordable Care Act's reinsurance program will pay out $7.7 billion for the 2015 benefit year, the Centers for Medicare & Medicaid Services (CMS) has announced.

CMS estimates that it will collect $6.5 billion from contributing entities for 2015, $5.5 billion of which it has already collected, and another $1 billion of which is scheduled to be collected by Nov. 15. Of that additional $1 billion, half will go to the U.S. Treasury for program administration, and the other half will go toward reinsurance payments.

In addition, the agency will carry over $1.7 billion in contributions for the 2014 benefit year, which per program regulations will be used for reinsurance payments for 2015.

The reinsurance program fell short of its collection target for the 2014 benefit year, as it was supposed to have an estimated $10 billion for reinsurance payments, $2 billion for the Department of Treasury fund and $20 million for administrative costs. However, it only collected $9.7 billion, FierceHealthPayer has reported.

That shortfall meant the funds were used to cover reinsurance costs and none went to the Treasury in 2014, according to a post by health law expert Tim Jost on the Health Affairs blog.  Even so, the program was able to provide reinsurance for all claims exceeding $45,000 up to $250,000 at a rate of 100 percent, with the aforementioned $1.7 billion left over to pay 2015 claims.

Because of the extra $1.7 billion, it is "quite likely that CMS will be able to pay out reinsurance at a higher rate than 50 percent for 2015," Jost writes. CMS says it will announce the final 2015 coinsurance rate and final estimated payment amounts June 30.

The reinsurance program is one of the ACA's "three Rs," which also includes the risk adjustment and risk corridor programs. The risk adjustment program has come under scrutiny of late, with some pointing out that it has benefited larger insurers at the expense of smaller nonprofits. The risk corridor program, meanwhile, was able to pay out only 12.6 percent of what it owed insurers for 2014, and the shortfall in payments is not expected to improve.

To learn more:
- here's the CMS announcement
- read the Health Affairs blog post

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