Ending the ACA’s risk corridor program amplified premium increases, research affirms

If the Affordable Care Act’s risk corridor program had been left intact, insurance premiums on the individual market likely would have increased just 10 percent between 2015 and 2017, according to an analysis by the National Bureau of Economic Research (NBER). Instead, premiums increased 37 percent during that period.

The three-year program, which was designed to encourage insurers to participate in the individual insurance exchanges by protecting them against extreme losses, ended in 2016, but Sen. Marco Rubio, R-Fla., and the Republican-led Congress effectively torpedoed it in December 2014 with an appropriations bill that blocked any funding for the program beyond the “user fees” collected from profitable insurers.

Not enough money was collected after the end of the first benefit year from insurers who performed well to pay those who fared poorly. Additional shortfalls for the subsequent two benefit years increased the program’s total deficit to approximately $12.3 billion. Numerous insurers have filed lawsuits in an attempt to collect what they are owed.

The NBER analysis found that insurers who claimed risk corridor payments in 2015 (for the 2014 benefit year, before the program was defunded) had higher premium increases in 2017, after the program ended. Further, markets in which more insurers made risk corridor claims saw larger premium increases after the program ended, which the researchers referred to as “equilibrium effects.”

Through extrapolation, the researchers estimated that ending the program accounted for 86 percent of all premium growth between 2015 and 2017, Fierce Healthcare reported.

The summary of the NBER findings stated that no evidence was found to indicate that insurers with larger risk corridor claims in 2015 were less likely to participate in the federal marketplaces in the following two years, but overall, “the end of the risk corridor program significantly contributed to premium growth.”