Archive for March 20th, 2014

ObamaCare’s Risk Corridor “Bailout” Just Got Bigger, Much Bigger

Thursday, March 20th, 2014
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By Filed under New Health Care Law on March 20, 2014 with 12 comments

Last Friday, the Administration quietly released 280 pages of rules that, among other things, increased ObamaCare’s risk corridors:

We propose to implement an adjustment to the risk corridors formula…Such an adjustment could increase a QHP issuer’s risk corridors ratio if administrative expenses are unexpectedly high or claims costs are unexpectedly low, thereby increasing risk corridors payments or decreasing risk corridors charges. We propose to raise the administrative cost ceiling by 2 percentage points, from 20 percent to 22 percent. We also propose to increase the profit margin floor in the risk corridors formula (currently set at 3 percent, plus the adjustment percentage, of after-tax premiums). Such an adjustment could increase a QHP issuer’s risk corridors ratio if claims costs are unexpectedly high, thereby increasing risk corridors payments or decreasing risk corridors charges. We propose to raise the profit margin floor by 2 percentage points, from 3 percent to 5 percent. (p. 56)

The table below shows an insurance plan with $10 million cost target versus $11 million of allowable costs. Actual medical claims are $8.8 million. Using the formula for calculating its payout from the risk corridor, allowing 20 percent of administrative costs, the plan gets a $410,000 “bailout” (panel A). If it can add administrative costs up to 22 percent of allowable costs, the payout increases to $635,641 — an increase of 55 percent (panel B).

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– See more at: http://healthblog.ncpa.org/obamacares-risk-corridor-bailout-just-got-bigger-much-bigger/#sthash.JoQk9bab.dpuf

Texas Lands First Captive

Thursday, March 20th, 2014

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20 March 2014

The Texas Captive Insurance Association (TxCIA) has licensed its first captive insurance company. CART Assurance Company, has successfully re-domiciled from Arizona to Texas and, as a result, is the first company to receive a Certificate of Authority to operate as a captive insurance company in Texas.

CART president, Irving Pozmantier, commented: “We have a high degree of confidence in the ability of the Texas captive regulators to provide an appropriate balance of regulation with assistance in establishing captive insurance companies with solid business purposes and sensible business plans. From our first meeting with the department’s captive team, they have extended full cooperation, thoughtful suggestions and flexible regulation.”

Texas state law was amended in 2013 in order to give it the ability to license captives to insure the risks of parent companies and affiliates, as well as controlled unaffiliated businesses. This also includes the redomestication of captives from other states. A number of companies have taken this option since the law was amended, with several more applications currently nearing approval at the TxCIA.