Before the Affordable Care Act, insurance companies were able to maximize their profits by denying or placing riders on the coverage of people with preexisting conditions. Now that the ACA requires them to insure sick and healthy alike without discriminating, it would seem they're taking a huge business risk. But as the Washington Post explains, it's not quite as big as it appears.
A piece of the ACA legislation called the Transitional Reinsurance Program offsets the risks of insurance companies who participate in the marketplace, by allowing them to collect payments from the government if the costs of covering the sickest people surpass a certain threshold.
"In regulations issued in March, Health and Human Services decided that a subscriber would have to run up at least $60,000 in claims before the insurer could tap into reinsurance dollars," reports the Washington Post.
The arrangement is temporary, giving companies a chance to test the marketplace and see how the real customer and cost scenarios for their health plans play out.
As the law was written, a fraction of the revenues from all of the health plans was supposed to pay for the reinsurance program, effectively redistributing monies as needed to cover the sickest subscribers.
Now the Senate is considering allowing insurance companies to delay having to pay that fraction into the program, an added bonus for insurers if it passes.. Read the story.