Risk Corridors (RC) FAQ
Guidance for FAQ regarding Calculations and Allocation of Payments and Charges to QHPs
Program Area: Risk Corridors (RC)
Question: If HHS reduces risk corridors payments for a particular year because risk corridors collections are insufficient to make those payments, how should an issuer's medical loss ratio (MLR) calculation account for that reduction?
Answer: Under 45 CFR 153.710(g)(1)(iv), an issuer should reflect in its MLR report the risk corridors payment to be made by HHS as reflected in the notification provided under 153.510(d). Because issuers will submit their risk corridors and MLR data simultaneously, issuers will not know the extent of any reduction in risk corridors payments when submitting their MLR calculations. As detailed in 45 CFR 153.710(g)(2), that reduction should be reflected in the next following MLR report. Although it is possible that not accounting for the reduction could affect an issuer's rebate obligations, that effect will be mitigated in the initial year because the MLR ratio is calculated based on three years of data, and will be eliminated by the second year because the reduction will be reflected. We intend to provide more guidance on this reporting in the future.
Issued by: Centers for Medicare & Medicaid Services (CMS)
Issue Date: April 14, 2014
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