Thread by @charles_gaba

📣 NEW: How much of a Risk Corridor rebate check might YOU receive? (thread)

acasignups.net/19/06/26/fun-r…

When the #ACA was passed, the Obama Admin & Congressional Dems knew that things would be pretty rocky the first few years, so they included several market stabilization programs to try and minimize the insanity. One of these was called “Risk Corridors”. 2/

The Risk Corridor program sounds confusing, but the simple version is this: For the first 3 years, insurance companies which did unusually WELL had to pay a portion of their profits into a central kitty… 3/

…while the carriers which did unusually POORLY would be reimbursed for a portion of their losses. While this may sound absurd, it’s actually been used with Medicare Part D without any fuss for over a decade. 4/

If the winners paid more $ into the pool than was owed to the losers, the federal gov’t got to keep the difference. There was even the thought at one point that the gov’t might make a *profit* off the program.
5/

If, however, the losers were owed more than what came in from the winners, the federal gov’t would have to cover the difference. It was a reasonable gamble which both the government AND EVERY SINGLE CARRIER agreed to. Contracts were signed with this understanding. 6/

In late 2014, during the “CRomnibus” crisis, congressional Republicans insisted on changing the rules of the Risk Corridor program: Instead of the gov’t paying the difference for any shortfall, the carriers would be SOL. The Dems (foolishly IMHO, but I wasn’t there) agreed. 7/

*IF* $ from the winners had ended up being more than the $ owed to the losers, all of this would’ve been moot. Unfortunately, the opposite happened…all 3 years. Over the course of 2014-2016, $12.7 billion was owed to the carriers…but there was only $482 million available. 8/

The feds paid out the $482 million, but the damage from the missing $12.2 billion was devastating to many smaller carriers, which didn’t have the cash reserves to weather the storm. Over a dozen went bankrupt over a matter of a few weeks; over 20 would eventually go kaput. 9/

Naturally, the insurance carriers sued the federal government for breach of contract/etc. It should have been a slam dunk of a case: The feds had a contractual & legal obligation to pay the carriers that money, period, regardless of any legislative changes partway through. 10/

A year ago, however, to the shock of legal observers, a federal circuit court ruled *against* the carriers, stating that the insurance carriers were indeed SOL.

https://twitter.com/nicholas_bagley/status/1007266852035354624?ref_src=twsrc%5Etfw

11/

U of M law professor @nicholas_bagley noted at the time that this would set a horrible, dangerous precedent. Why would ANY private company agree to sign a contract with the U.S. federal government if they knew the gov’t might stiff them at any time? 12/

@nicholas_bagley In any event, that’s where things stood…until this week, when the #SCOTUS announced that they were gonna take up the Risk Corridor case after all…presumably in 2020, some 5 years after the first payments were missed: acasignups.net/19/06/25/well-… 13/

@nicholas_bagley If #SCOTUS rules *against* the carriers, it will set a lousy precedent…but not much else will change, since that’s already the status quo. The bankrupt carriers will remain dead while the rest will continue on, perhaps a bit gun-shy about agreeing to contracts in the future. 14/

@nicholas_bagley However, what happens if #SCOTUS rules FOR the carriers (which they absolutely should…this isn’t about feeling sympathetic for the poor, poor health insurance companies; it’s about the Full Faith & Credit of the U.S. Government)? 15/

@nicholas_bagley If *that* happens, as @bjdickmayhew put it, things get really weird…especially if that $12 billion windfall (divided across a couple hundred carriers) ends up being counted on a cash basis *in the year in which it’s received*, which seems likely. 16/

@nicholas_bagley @bjdickmayhew And that brings me to today’s blog entry, which I spent a solid 12 hours putting together yesterday because I had to pull all the data together & reformat it from multiple PDFs: acasignups.net/19/06/26/fun-r… 17/

@nicholas_bagley @bjdickmayhew Obviously the *insurance carriers* will be happy (as will the creditors for the carriers which were liquidated)…but something else important will happen. That’s where *another* key #ACA program comes into play: the #MLR (Medical Loss Ratio) rule. 18/

@nicholas_bagley @bjdickmayhew Under the #ACA insurance carriers have to spend *at least 80%* of their gross profits on *actual medical claims*, as opposed to marble staircases & junkets to Tahiti and such. It was put in place by President Obama & Congressional Democrats to discourage price gouging. 19/

@nicholas_bagley If an insurance carrier brings in $100 million in premiums but only spends $75 million on claims, they have to PAY BACK the other $5 million *to the policyholders*. This is an oversimplification, but since 2011 *millions* of people have received rebate checks each year. 20/

Here's how much has been paid back to #ACA enrollees over the years. Notice how the total have been between $400 million - $1.1 billion per year, averaging between $49 - $119 per enrollee. Not a lot of money, but not bad either. 21/

You're probably seeing where I'm going with this now. What happens if that same insurance carrier, which THOUGHT they were going to generate $100 million & pay out $5 million of it, suddenly receives, say, a $20 million one-time risk corridor payment from the federal gov't? 22/

Suddenly they go from having a #MLR of 75% ($75M / $100M) to 62.5% ($75M / $120M). They may very well have to turn around and pay the entire $20 million back out to their enrollees as part of the rebate check (although not necessarily all of it depending on other factors). 23/

As @bjdickmayhew noted yesterday, due to the timing of SCOTUS and the fiscal year reporting of the carriers, the odds are that the risk corridor payments would be made in 2020 with MLR rebates stemming from them being paid in mid-2021 to anyone who was enrolled in 2020. 24/

So how much are we talking about? Well, it'd vary widely by state and insurance carrier, and a LOT depends on how those carriers did otherwise. If a carrier is over the 80% MLR threshold, a chunk of the money will go to reduce that first. Not every carrier will owe rebates. 25/

Nationally, the total amount owed is around $10.9 billion to #ACA individual market carriers and another $1.3 billion to small group market carriers, or $12.2 billion total. Remember, some of the companies went out of business; their money will go to the creditors. 26/

If the $10.9 billion was divided up evenly across the ~13 million people on the #ACA individual market, that would average ~$838 apiece (spread over 3 years). However, the *actual* amount would vary *widely*. It depends how much $ and how many enrollees each carrier has. 27/

For instance, here in Michigan, Blue Care Network is owed around $39 million. They have around ~140,000 indy market enrollees, so that'd be around $278 apiece. Not bad!

However, check out Blue Cross Blue Shield of Texas: They're owed a whopping $982 MILLION. 28/

I don't know how many #ACA enrollees BCBSTX will have, but I have them down at 390K a year or so ago. If that's accurate, each *might* be looking at up to $2,500.

Anyway, I have estimates of what's owed to every carrier listed here. Find yours! /END

acasignups.net/19/06/26/fun-r…

⚠️ IMPORTANT CORRECTION: In #19 above, that's 80% of their gross REVENUE, not gross *profits*. Sorry about the error!