Risk Corridors (RC) FAQ

Guidance for FAQ regarding Calculations and Allocation of Payments and Charges to QHPs

Program Area: Risk Corridors (RC)

Question: Guidance from the Centers for Medicare & Medicaid Services (CMS) for the Risk Corridors calculation suggests the calculation is an 'either or' calculation and not a combined payment. Are Qualified Health Plans (QHPs) supposed to calculate the payment amount between 103 percent and 108 percent and add to that amount the calculated amount over 108 percent?

Answer: According to 45 CFR 153.500 which details the Risk Corridors establishment and payment methodology, the Department of Health and Human Services (HHS) will make payment to QHP issuers under two (2) scenarios: (1) When a QHP's allowable costs for a benefit year exceed 103 percent, but are not more than 108 percent of the target amount, HHS will pay the QHP issuer an amount equal to 50 percent of the allowable costs in excess of 103 percent of the target amount; (2) When a QHP's allowable costs for a benefit year are more than 108 percent of the target amount, HHS will pay the QHP issuer an amount equal to the sum of 2.5 percent of the target amount plus 80 percent of allowable costs in excess of 108 percent of the target amount. In a single year, a QHP issuer can either be required to pay a Risk Corridors charge amount to HHS, or would be eligible to receive payment from HHS; it is not possible for the issuer to be in both categories. The calculation of the Risk Corridors is a single calculation. When issuers submit Risk Corridors data, HHS will automatically calculate the Risk Corridors ratio and the Risk Corridors payment or charge amount for the issuer.