HHS offers insurers new protections against high claims

HHS offers insurers new protections against high claims
© Blue Cross Blue Shield of Arizona

The Obama administration on Wednesday announced it is expanding a program designed to shield insurance companies from extremely high claims costs.

The system, known as the reinsurance program, allows insurance companies to pay into a nationwide pool that partially reimburses them for healthcare claims that exceed a certain level. 

ADVERTISEMENT

The Department of Health and Human Services (HHS) said Wednesday that it will fully reimburse for those claims.

HHS will now pay 100 percent of claims costs between $45,000 and $250,000 — an increase from the previous rate of 80 percent.

The department has touted the program as a way to keep premiums stable by helping companies avoid extremely high claims costs. It specifically applies to grandfathered plans, which do not have the same protections under ObamaCare. 

In 2014 alone, the Health Department has collected about $8.7 billion from insurance companies to fund the program. That amount will grow by $1 billion more before November, according to a memo from HHS.

Companies paid $63 per person last year — a fee that drops each year through 2016.

The entire program is expected to collect $25 billion through 2016.

The announcement is good news for the Obama administration, which said it is “pleased to announce” the rate increase.

While ObamaCare opponents predicted massive pent-up demand by sick customers, the decision from HHS instead indicates that the program is healthy.