Risk Corridor

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Policy Examples

  • The Medicare Modernization Act of 2003 established  prescription drug  coverage through Medicare Part D and introduced risk corridors to stabilize costs. The Act went into effect in 2006 and limited Medicare Part D plans’ potential total losses or gains by the risk corridor. The risk corridors remain in effect and increase each year. source
  • Section 1342 of the Affordable Care Act (ACA) instituted a temporary risk corridor program from 2014 to 2016. The goal of this program was to help reduce price uncertainty and incentivize insurers to offer plan options on the public exchange. source

Outcome Evidence

  • In 2016, Modern Healthcare reported the Obama administration was responsible for paying out over $8 billion to cover insurer losses from the risk corridors on the health insurance exchanges. According to Wharton, as of 2018, the risk corridor payments totaled $12.3B. The government's lack of payment undermines the confidence insurers have on government promises and other adverse effects such as premium increases and distorted risk pools. source
  • As of 2014, the federal government collected more money from insurers than it paid out through the Medicare Modernization Act Risk corridor program. source

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