Fed decision shorts Montana health insurers millions of dollars - KPAX.com | Continuous News | Missoula & Western Montana

Fed decision shorts Montana health insurers millions of dollars

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Health insurers selling individual policies on Montana’s “marketplace” will be shorted millions of dollars in federal payments this year, thanks to an Obama administration decision unveiled this month.

But two of the three insurance firms say it shouldn’t hurt their financial position too much.

“This hurts us and it hurts a lot of (health) co-ops, but because of the way we’ve managed our costs, we’re still in good financial shape,” said Jerry Dworak, CEO of the Montana Health Co-op. “We think this is just a blip going forward.”

The Co-op, which insures 23,000 people in Montana and another 20,000 people in Idaho, had expected about $6 million this year in federal “risk-corridor” payments to help offset losses for 2014, its first year of operation.

The payments are part of the 2010 Affordable Care Act, to help health insurers cover unexpected costs as they offered new policies for the first time on the online marketplace.

But 10 days ago, federal officials announced the government would cover only 12.6 percent of the requested payments. That means the co-op gets only $800,000.

A spokesman for PacificSource said it hadn’t budgeted for the payments anyways, so losing them won’t affect its bottom line.

PacificSource, which covers about 10,000 people on individual policies in Montana, had requested nearly $7 million in payments for policies in Montana, Oregon and Idaho, but will receive just $1 million, said Todd Lovshin, the company’s Montana vice president.

Blue Cross and Blue Shield of Montana, the third company selling policies on Montana’s marketplace, refused Monday to release any information on its loss of “risk-corridor” payments from the federal government.

The company would issue only a statement saying it’s “working internally and with our external partners to assess the implications.” Blue Cross insures about 22,000 people on policies sold via the marketplace.

The Obama administration announced Oct. 1 it would not pay $2.5 billion requested by insurers nationwide in risk-corridor payments for 2014 – about 88% of what the companies had asked.

The payments help companies cover losses that exceed the premiums they charged for marketplace policies sold in 2014 – the first year such policies became available, as part of the federal health-care overhaul.

It’s also uncertain whether these payments will be made for 2015 and 2016.

Dworak said the loss of 88% of the 2014 payments may sink some of the new, state-based nonprofit health insurance co-ops created and financed by the ACA.

The Montana co-op, which lost $3 million last year, is not in danger of folding, he said, because it has maintained strong reserves and did not expand too quickly.

“We kept our costs down,” Dworak said. “We’ve been very conservative. That’s kind of saved the day for us, for now.”

The cut in payments stems from a budget deal worked out in Congress, in which Republicans insisted the program be “revenue neutral,” which they knew would mean less money for insurers, he added.

Insurers will be watching and waiting to see what happens to the money for 2015 and 2016, he said.

Lovshin said PacificSource also played it cautious in this new market, not counting on any payments.

“We’ve positioned ourselves in our rate filings and our overall accounting practices to not depend on these (risk-corridor) payments,” he said. “We feel pretty fortunate that we are taking the course that we took.”

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