U.S. government plan adjusts 2014 risk payments for health insurers

(Reuters) - The U.S. government has issued a proposal that would likely increase risk payments in 2014 to health insurers offering plans on the Obamacare exchanges after the companies complained a recent policy change allowing people to keep their insurance policies had changed the financial equation.

U.S. President Barack Obama talks about the Affordable Care Act in the Brady Press Briefing Room at the White House in Washington, November 14, 2013. REUTERS/Larry Downing

The rule, published on Monday in the Federal Register, lowered the threshold at which risk payments kick in for the sickest health plan members. The government proposed paying insurers 80 percent of claims greater than $45,000 in 2014. Previously the lower limit was $60,000.

There is a 30-day comment period for the proposed rule.

In addition, the government has proposed a state-specific adjustment for risk payments based on how many people in the state extend their current polices, Citibank analyst Carl McDonald explained in a research note.

The exchanges are being created as part of President Barack Obama’s healthcare reform law. An estimated 7 million people are expected to sign up.

Insurers including Aetna Inc, Humana Inc, WellPoint Inc, Cigna Corp, UnitedHealth Inc and Molina Healthcare Inc have all offered plans on the state-based exchanges.

“Whether good or bad, it’s always worth pointing out that most of the publicly traded plans have little existing exposure to the individual market, while the exchange participation of several plans is quite limited in 2014,” McDonald wrote.

As an incentive for participating in the exchanges, the insurers were promised certain risk payments for the first three years to help offset uncertainty about the health of participants.

Technology problems on the exchange have slowed enrollment significantly, calling into question whether insurers will get the mix of healthy and sick people on which they had based their premium rates.

When Obama announced a plan about two weeks ago to allow individuals to keep their current plans longer, insurers complained it would remove even more people from the pool of applicants and asked for adjustments to the risk payments.

Reporting by Caroline Humer; Editing by Jeffrey Benkoe