BCBS Will Receive $549 Million from CMS

The federal government will pay out nearly $8 billion in claims reimbursements to 437 health insurers under a reinsurance program created by the health care reform law.

Under the first year of the three-year Transitional Reinsurance Program - intended to encourage insurers to provide coverage in the individual market - health insurers writing coverage in the individual market are reimbursed by the government for 2014 claims between a $45,000 attachment point and a $250,000 ceiling.

The biggest payment - $549 million - will go to Blue Cross Blue Shield of Texas, followed by Anthem Blue Cross of California, $401.1 million and Blue Shield of California, $363 million, the Centers for Medicare & Medicaid Services disclosed in a report issued Tuesday.

First-year revenue for the three-year program comes from a $63 per-participant fee paid by all self-insured employers and fully insured health plans. The 2015 fee is scheduled to decrease to $44 per participant, while the 2016 fee is scheduled to decline to $27 per participant. After 2016, the program ends and health insurance premiums will need to be adjusted to pay the claims without a reinsurance reimbursement.

Earlier, government regulators said they expected to collect $9.7 billion in first-year fee payments, close to the statutory $10 billion set amount for claims reimbursement.

However, in 2014 the number of exchange enrollees was less than anticipated and the claims incurred over $45,000 were less than expected. As a result, insurers are being reimbursed for 100% of claims between the $45,000 attachment point and $250,000 ceiling.

Even with that boost in reimbursement, the government will collect roughly $1.7 billion more in reinsurance premiums than it will pay out in claims reimbursement to insurers.

The roughly $1.7 billion in unused 2014 reinsurance contributions will be used to make reinsurance payments for the 2015 benefit year, CMS said. Another option would be to reduce the fee being charged in 2015 and 2016.

Please feel free to contact us if you have any questions. 

Thank you, 
George Knox, CLU, ChFC
214.695.2904 (mobile) 214.443.1400 (office) | george@insuranceisboring.com

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