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Insurers face health overhaul losses for 2014

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About 9.9 million people have signed up and paid for health insurance under President Barack Obama's health care law

WASHINGTON >> Health insurers will lose about $2.5 billion because patients covered through President Barack Obama’s health law last year were sicker than expected, according to government figures released late Thursday.

The Department of Health and Human Services released updated numbers for a program that helps stabilize premiums in the health care law’s insurance markets, which offer taxpayer-subsidized private plans. Under that program, insurers whose medical claims costs were lower than expected pay in money to help insurers whose costs were higher.

For 2014, insurers that had sicker-than-expected patients requested nearly $2.9 billion in payments, HHS said. But the government has collected only $362 million from insurers that did well.

That means insurers who requested payments will get less than 13 percent of what they sought. Some plans may face financial problems as a result, Obama administration officials acknowledged. They said those are expected to be isolated cases.

A leading explanation for the shortfall is that 2014 was the first year of the program, and insurers were uncertain about where to set their premiums. Things may ultimately balance out, but it’s too early to tell.

"It shows that insurers set premiums too low in the first year for the health care costs associated with who enrolled," said Larry Levitt of the nonpartisan Kaiser Family Foundation. "I would expect insurer finances to improve as they’ve adjusted premiums and enrollment has grown, bringing in more healthy people."

The insurance industry was disappointed at what its officials called a significant shortfall.

"Stable, affordable coverage" depends on adequate funding of the program, said a statement from Marilyn Tavenner, CEO of America’s Health Insurance Plans, the industry lobby. "It’s essential that Congress and (the administration) act to ensure the program works as designed and consumers are protected."

Tavenner, who has just taken over at the industry group, was the Obama administration official in charge of the chaotic rollout of the health care law in 2013.

Despite the concerns of insurers, the Republican-led Congress is unlikely to allocate any additional money for the program, a temporary stabilization fund that lasts three years.

Technically, the health care law obligates the government to pay insurers for their claims. How that would happen, however, was not clearly specified by the legislation.

Premiums for 2016 are due to be announced soon. Overall, increases are expected to be modestly higher than was the case this year.

Separately, a White House official said Obama would sign just-passed legislation allowing states to opt out of another requirement of the health care law. The official, who was not authorized to speak publicly ahead of the announcement, spoke on condition of anonymity.

Under the law, the size of the small business health insurance market was set to expand Jan. 1 to companies with up to 100 workers, from the current definition of 50 workers or fewer in most states. Employer groups and insurers said that would disrupt the market, leading to higher premiums.

The legislation, known as the PACE Act, would allow states to keep the small employer market at companies with 50 or fewer workers. The bill had bipartisan support.

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