The Obama administration announced earlier today that it would increase the rate of subsidy provided insurers under the transitional reinsurance program established by the Affordable Care Act. This program, in effect for the policies sold in 2014, 2015, and 2016 on one of the individual insurance exchanges fostered by the ACA, provides free specific stop loss reinsurance to insurers, something insurers would otherwise have to pay a lot of money to obtain. The Center for Medicare and Medicaid Services (CMS) announced today that instead of taxpayers giving insurers 80% of the losses on any individual for their claims between $45,000 and $250,000, it would now pay a full 100% of these losses.
The higher rate of reinsurance should not be interpreted as a sign that claims were lower than insurers expected — something that would run contrary to many of the recent insurer rate hike filings or the losses reported by many insurers. It is not a sign of the success of Obamacare; rather it is an artifact of its problems. If, for example, there were 14% fewer people enrolled in Obamacare than at the time the reinsurance rates were initially determined (7 million vs. 6 million), reinsurance payments could be, as here, yet more generous to insurers even if claims were 10% higher than originally projected.
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