ACA Title 1,Sec. 1342. Establishment of risk corridors for plans in individual and small group markets.: “Bad” – Removes much of the business incentive for efficiency. This provision effectively eliminates any real incentive for efficiency or prudency in the administration of the health insurance plans for the individual and small group markets. The three year ((2014 – 2016) creation of a federal determined cost experience “corridor” for cost shortfalls and premium surpluses gets the federal government deep into the business of health insurer and health plans. The regulatory requirements of this section are enormous. Also with a 50% rate of federal subsidization for losses (up to a maximum) and 50% rebate of surpluses up to a maximum back to the federal government it generally undermines the market incentives for efficiency in administering health coverage. I believe it would be better if the triggers for this section were at the extreme ends, rather than as a corridor, such as this provision could be triggered by a loss ratio of 110% or greater or a loss ratio less than 70% and then only at the request of the health plan or insurer Involved and if it was triggered both shortfalls and surpluses would be examined. By artificially narrowing the range of price quotes through the existing provision it is likely to have the effect “homogenizing” the efforts of health insurers and plans while providing a subtle incentive to gain business at the expense of the federal government. Also it appears to provide an incentive to not contain or limit administrative cost. Clearly it significantly distorts market mechanisms in health care even in the short run.

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