<p>Looks like these are ways to compensate the insurance companies if they get the premiums wrong (risk corridors, only for the first three years of the ACA), and if a plan attracts a particularly high-risk set of people (risk adjustment, ongoing). </p>
<p>So what stops an insurance company from deliberately establishing premiums that are too low, knowing that they will be paid back by the risk corridors?</p>
<p>Originally, SHOP was going to be available to small-business employEEs. The employer would set stuff up on SHOP, and then employees would be able to choose different plans, which would be paid for partially by the employer, in whatever way the employer specified. </p>
<p>But once they delayed the employEE part for a year, the employER part became less attractive. As calmom says, employers would probably be better off using an agent in most cases anyway. Once the employee portion is available, the employers probably still will be better off using an agent to set things up.</p>
<p>I think the answer about risk corridors is that the insurance company gets paid back some of their losses, but not all of them. So the insurance company that set the rates too low will still lose money but not as much. I think.</p>
<p>The risk adjustment program turns out to be payments from one insurance company to another (mediated by the state or HHS). So, however the insurance companies can game the situation, the taxpayers are not on the hook for the money, as I understand it.</p>
<p>Cardinal Fang, I don’t believe that is correct.</p>
<p>Insurance companies that have fewer losses than their projections do pay part of the overage into the risk corridor fund. Insurance companies that have larger losses than their projections get partially covered from the fund. However, there is nothing that requires this to be revenue neutral. The payments for losses are not capped and come from the taxpayers if there is insufficient offset.</p>
<p>And, I believe that the government offered additional “risk corridor” support to the insurance companies in bargaining over the “you can keep your plan” fix…</p>
<p>BTW, the risk corridor targets are established in advance when the insurance companies submit their actuarial projections for review by the Obamacare administrators at HHS. One would be expected to presume that government experts would carefully and accurately review the projections before going live with the plan offerings…</p>
<p>interesteddad, as I read it you’re right-- the risk corridors are not revenue neutral, and if a particularly bad risk group ended up signing up for individual insurance on the exchanges, then we taxpayers could be out a bundle. </p>
<p>But the risk adjustment appears to be payments from one insurance company to another. So what I’m saying is, the risk corridors could cost us money but the risk adjustment would not cost us money.</p>
<p>So we taxpayers need to go out and encourage young invincibles to sign up for insurance on the exchanges to save ourselves money ;)</p>
<p>So, interesteddad, are the risk corridors all federal, or can the states handle it if they want? Seems odd to have HHS reviewing the actuarial projections for the insurance companies, when the states already reviewed them.</p>
<p>I haven’t dug that deeply into the weeds, but my assumption is that, if the feds are on the hook for the money, they probably have their hand in baking the pie…</p>
<p>Working from memory, the risk corridors are something like reimbursing 50% of losses over and above 3% over target and 80% of losses above 8% over target. Those percentages probably aren’t the real numbers, but that’s the basic mechanism.</p>
<p>BTW, I understand that the CBO assumed the risk corridors to be revenue neutral when the scored the budget projections.</p>
<p>So, the insurance company gets reimbursed for some of their losses, but not all of their losses. So if you’re setting the rates for your insurance company, you want to get your rates right if you want to keep your job; you have no incentive to cheat low. “Gee, boss, we got paid back for some of the money I lost us.” Yeah, that’s not going to work.</p>
<p>A relative of mine is working with the insurance companies in California on ACA. The insurance companies want to make money. They arent trying to lose money. </p>
<p>"As shoppers hunt for holiday bargains this season, they may find something unusual for sale at the mall: Obamacare.</p>
<p>With enrollment deadlines looming, California officials, insurance companies and agents are staking out retail space to sign up thousands of people as part of the Affordable Care Act. These sales tactics reflect how dramatically the healthcare law is changing the insurance industry.</p>
<p>Until recently, most health insurance companies and agents didn’t put much time into selling policies to individuals and focused more on catering to employers and large groups in the workplace. But the health insurance mandate and billions of dollars in federal premium subsidies have made individual policies a far more attractive market."</p>
<p>Cardinal Fang, nice to see you didnt drop off the face of the earth. </p>
<p>dstark, That was my understanding about the risk corridors, after reading up more carefully. Insurance companies are in business to make money. It’s not to their advantage to underprice their premiums because then they will lose money, or to overprice their premiums, because then no one will buy from them and they will have done all that work for nothing.</p>
<p>Happy Thanksgiving, everyone. I’m glad to be back from my, um, CC vacation.</p>
<p>It should come as no surprise that insurance companies want to optimally price their products. That’s what companies do. That’s what they have always done. It’s an actuarial-based product and they have very good actuaries.</p>
<p>I think the main reason the individual market wasn’t as attractive is that there were not government tax subsidies to artificially lower the price as there have been in the employer-based market. The easiest way to fix the insurance market would probably have been a straight across the board tax credit for health insurance, regardless of where and how it was purchased.</p>
<p>Insurance companies are reportedly queasy about the idea of sellling policies without giving the purchaser a firm price quote. They probably are suspicious that if the actual subsidy turns out to be lower than they EZPLAN estimate, they will end up eating the difference.</p>
<p>Jeez, I would expect buyers to be queasy about subsidy estimates, as well. And what about next year? These things have a way of changing unexpectedly.</p>
<p>“I think the main reason the individual market wasn’t as attractive is that there were not government tax subsidies to artificially lower the price as there have been in the employer-based market. The easiest way to fix the insurance market would probably have been a straight across the board tax credit for health insurance, regardless of where and how it was purchased.”</p>
<p>The employer market doesnt just benefit from government subsidies. There is a healthier customer base in the employer based market. People in the employer based market are wealthier on average than the people who are uninsured. Some employees also benefit because employers help pick up the tab.</p>
<p>ACA does have some taxpayers pay some of the tab. There are user fees. If there were more subsidies for individual health insurance who is going to pick up the tab?
Who is going to throw money into the pot due to the lack of employer coverage in the individual health insurance market?</p>
<p>Not sure how accurate the article is but it is interesting. It’s a survey of 16 metropolitan areas delineating provider coverage for exchange plans.</p>
<p>California has also signed up about three quarters of a million Californians for Medi-Cal (=Medicaid), including 600,000 who are being transitioned from an intermediate program, LIHP, that was established by the ACA.</p>
<p>I just saw my first Covered California ad on TV while I was making a pie. And I’ve seen several ads for one of the insurance companies, ads clearly aimed at young people who might not have insurance.</p>