Obamacare payment to insurers $2.5 billion less than expected

Reneging on previous promises and guarantees, the federal government has decided to short insurance companies out of billions of dollars agreed to under Obamacare.

The Washington Examiner reports that, “Insurers learned late Thursday that they’ll receive just $362 million out of the $2.9 billion” they had requested from Obamacare in 2014. Why? Because Obamacare “hasn’t brought in nearly as much money as it needs to pay out.”obamacare

Unfortunately for insurance companies, they have enrolled higher numbers of older and sicker customers than anticipated. The Obama Administration promised the insurers federal funds “to help cover their costs, through a program known as risk corridors.”

Here’s how the program was supposed to work:

If a health plan found itself with at least 3 percent more medical claims than it had anticipated, the government would reimburse it for half of those losses. If claims surpassed expectations by more than 8 percent, the government would pay 80 percent of the losses.

However, “the law requires the program to be budget-neutral, meaning that if there aren’t adequate funds, insurers have to go without.” There’s the fine print that is the crux of the problem.

The response from the insurance industry  (hoping to see a boon to their bottom line under Obamacare) was harsh and swift.

“Stable, affordable coverage for consumers depends on adequate funding of the risk corridor program,” said Marilyn Tavenner, CEO of America’s Health Insurance Plans. “It’s essential that Congress and CMS act to ensure the program works as designed and consumers are protected.”

Notice the line, “stable, affordable coverage for consumers.” Many Obamacare enrollees would say that coverage has been anything but stable and affordable so far. Rates for plans offered through Obamacare are continuing to climb, and that doesn’t seem likely to change. With the loss of these expected funds to help prop up the bottom line of these insurers, further price increases in Obamacare plans are certain.

There is a ray of hope, if only a tiny one, as the Obama Administration said that insurers will “eventually” get their money.  That’s likely little consolation to insurers if the federal government’s track record is considered. One only has to look to the Individuals with Disabilities Education Act (IDEA), passed in 1975. During the years 1981-2010, states were shorted over $250 billion promised to them under the new law, but were of course still expected to comply.

With a mounting national debt of over $18 trillion, Washington’s ability to keep its promises isn’t likely to improve any time soon, and customers are likely going to continue to see higher premiums, larger deductibles, and smaller networks – exactly the opposite of what was promised under Obamacare.


Kristina Ribali is the Senior Coalitions Director for the Foundation for Government Accountability. Follow Kristina on Twitter or contact her via email at [email protected]