Given the uncertainty for insurers in the exchanges the first few years, risk corridors were established to enable the federal government to share the risk with the health plans from 2014 to 2016. If a health plan has costs that are at least 3% lower than expected, they turn some of the money over to HHS. And those that have higher costs than expected will get payments from HHS to offset part of it. If it’s in between – within that corridor – no money is transferred.
However, Congress has required risk corridor payments to be revenue-neutral – meaning taxpayer funds couldn’t supplement payments from the health plans themselves. That created a significant shortfall; for 2014, plans got 12.6 cents on the dollars. It is unclear how the federal government will resolve this.