Evaluation Of A Risk Corridor

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For clarification a risk corridor is a formed idea that if insurance companies rake in higher cost than expected the government will reimburse the insurer to a certain percentage. As an example, if an insurer’s actual claims in 2014 are at least 3% greater than the claims projected when the insurer set 2014 rates, the government must reimburse the insurer for half of the excess (Radnofsky, 2014). On top of that, if total claims jump 8% the government would be liable for 80% of the excess costs. This is a really risky move because the unhealthy population with insurance could be extremely costly. The risk corridors gave third party payers the re-insurance by providing insurance to all parties. These insurers in 2015 needed massive bailouts from the government for substantial losses reaching 2.5 billion. This can become an increasing expense over the years. Most of all the taxpayers will be on the hook for these enormous losses, while funding private shareholder owned insurance companies. The main issue at hand was the Department of Health and Human Services didn’t pay the full percentage that was applicable under the risk corridor, which bankrupt some insurance providers. These small changes slowly deteriorate the free exchange market the affordable care act was built upon. The CEO Kelly Crowe of National Alliance stated “few businesses can sustain hits like the CO-OPs and other small and new insurance companies have endured” because of the federal government’s
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