Lawmakers Close Obamacare ‘Risk Corridor’ Bailout Process

Published January 11, 2016

As part of the Consolidated Appropriations Act (CAA), the $1.1 trillion omnibus spending deal passed in December, provisions included in the Affordable Care Act (ACA) that transfer taxpayer money to health insurance companies were revised, reducing the opportunities for government agencies to subsidize insurance companies and offset financial losses caused by ACA’s costly reformation of the nation’s health care industry.

These provisions, called “risk corridors,” were adopted to subsidize health insurance companies experiencing cost overruns caused by the increased cost of health care plans and insurance regulations. The new rules, passed as riders in CAA, block the U.S. Department of Health & Human Services’ Center for Medicaid and Medicare from using its budgeted money to fund insurance company bailouts.

Risky Business

Edmund Haislmaier, a senior research fellow with The Heritage Foundation’s Center for Health Policy Studies, says lawmakers and health care industry lobbyists underestimated Obamacare’s costs because they used overly optimistic financial projections.

“When Congress passed [ACA], the way they wrote the legislation, they assumed the ones getting a payout from the government were going to be offset by the ones paying in,” Haislmaier said. “It wasn’t absolutely explicit, but Congress kind of thought that’s what they were doing. The administration also was putting out that line.”

Haislmaier says the crystal balls belonging to government prognosticators and insurance company adjusters were just as cloudy as those used by Obamacare supporters.

“The CBO actually expected this provision to pay money back to the government,” Haislmaier said. “In fact, it didn’t. On Obamacare, you had insurers underestimate how costly it was going to be, and they found out that it was a lot costlier.”

Obamacare ‘Model Doesn’t Work’

Phil Kerpen, president of American Commitment, a nonprofit group dedicated to restoring and protecting free-market values, says all of Obamacare, and not just the risk corridor program, is financially unsound.

“The real story here is the Obamacare business model doesn’t work,” Kerpen said. “All the co-ops are going out of business. All of the commercial carriers are losing tons of money. United Healthcare is going to exit the exchanges after next year. Could you maybe entice them to stick with it a little bit longer if you threw taxpayer money at them? Probably, but that doesn’t mean Obamacare would work. It may only paper it over for a little while, maybe get them through the elections.”

Kimberly Morin ([email protected]) writes from Brentwood, New Hampshire.

Internet Info:

Brian Blase, “Downgrading the Affordable Care Act: Unattractive Health Insurance and Lower Enrollment,” Mercatus Center: