Insurers Up in Arms Over GOP’s New Obamacare Attack

The largest firms sat quietly through umpteen repeal votes — so why are they flipping out now?

Risk corridor: GOP bugaboo. 
National Journal
Sam Baker
Feb. 10, 2014, midnight

While Re­pub­lic­ans spent years go­ing for Obama- care’s jug­u­lar, in­sur­ance com­pan­ies kept calm and car­ried on. Through dozens of re­peal votes in the House, in­clud­ing sev­er­al that would have un­done parts of the law the in­dustry de­pends on, the largest firms stood on the side­lines. Throughout the nearly four years of post-Obama­care polit­ic­al mael­strom, their power­ful lob­by­ing op­er­a­tions let polit­ics run their course. So why now — just as Re­pub­lic­ans are chan­ging their tack to take on a wonky, low-pro­file part of the law — is the in­dustry alarmed?

Be­cause this wonky, low-pro­file part of the law, per­haps more than any oth­er, provides a safety net that in­sur­ance com­pan­ies con­sider es­sen­tial. And the at­tack on it has some large car­ri­ers on the verge of apo­plexy, in part be­cause Re­pub­lic­ans have sup­por­ted nearly identic­al pro­grams in the past.

At is­sue are the Af­ford­able Care Act’s “risk cor­ridors” — part of a three-pronged safety net de­signed to sta­bil­ize the in­sur­ance mar­ket in case ACA en­roll­ment works out dif­fer­ently than ex­pec­ted. Through risk cor­ridors, the gov­ern­ment helps soften un­ex­pec­ted losses and shares in un­ex­pec­ted gains.

Re­pub­lic­ans, however, con­tend the pro­gram is an “in­surer bail­out” be­cause it puts the gov­ern­ment on the hook for some of in­surers’ losses — and Re­pub­lic­ans in­sist that losses are in­ev­it­able. Cer­tain con­ser­vat­ives, led by Sen. Marco Ru­bio, want to re­peal the Af­ford­able Care Act’s risk cor­ridors, per­haps as part of a deal to raise the debt ceil­ing.

Re­peal­ing the risk cor­ridors would be ter­rible for in­sur­ance com­pan­ies — and for Obama- care. Premi­ums would rise, and some plans might de­cide to leave the law’s new mar­ket­places al­to­geth­er. But the same could be said about plenty of anti-Obama­care bills. Had Re­pub­lic­ans suc­ceeded in their push to re­peal the law’s in­di­vidu­al man­date, in­surers would have be­come cus­todi­ans of an im­possible in­dustry. Pro­pos­als to un-can­cel cer­tain in­sur­ance policies threatened Obama­care’s mar­kets. Elim­in­at­ing sub­sidies to buy in­sur­ance would drain in­surers’ new cus­tom­er base.

In­surers made their ar­gu­ments against those meas­ures, sure, but they didn’t get es­pe­cially riled up over them. They de­clined to openly break with their Re­pub­lic­an al­lies, and they could count on the Demo­crat­ic Sen­ate and the White House to kill any­thing that would ac­tu­ally destabil­ize the law. Giv­en that the same polit­ic­al dy­nam­ic ap­plies to risk cor­ridors, why the sud­den pan­ic? (A sample: The Blue Cross Blue Shield As­so­ci­ation, in talk­ing points, re­cently said re­peal­ing risk cor­ridors could be a gate­way to a single-pay­er sys­tem.)

For starters, some health care ex­perts said, the charge of a “bail­out for in­sur­ance com­pan­ies” sounds a lot more like an at­tack on in­surers than an at­tack on Obama­care. Second, this de­bate is new. By the time the House voted to re­peal the in­di­vidu­al man­date, the mer­its of that is­sue had been lit­ig­ated for years. But hardly any­one un­der­stands the eco­nom­ics be­hind the cor­ridors, so in­dustry of­fi­cials say they have to make sure the “bail­out” la­bel doesn’t stick. “There’s a fair amount of mis­un­der­stand­ing about what these pro­grams are.”¦ These are really ar­cane pro­grams,” says one in­dustry of­fi­cial who asked for an­onym­ity to com­ment on pro­pos­als from the GOP, which is nor­mally an ally.

Third, in­surers know they need risk cor­ridors — and they know Re­pub­lic­ans have re­cog­nized that need in the past. “Be­cause we are not sure that the private sec­tor will get enough money in the gov­ern­ment re­im­burse­ments to the plan,” Re­pub­lic­an Sen. Jon Kyl said in 2003, talk­ing about cre­at­ing Medi­care Part D, “we’ll need to cre­ate some risk cor­ridors. We need to cre­ate a sta­bil­iz­a­tion fund.” Mark Mc­Cle­l­lan, serving at the time as Pres­id­ent Bush’s Medi­care ad­min­is­trat­or, said in 2004 that “risk cor­ridors will al­low the gov­ern­ment to share in any un­ex­pec­ted gains or losses that the plans in­cur and help plans in the early years of the re­gion­al plan pro­gram while they gain ex­per­i­ence.”

Obama­care’s risk cor­ridors work a lot like Medi­care Part D’s. When in­sur­ance com­pan­ies’ costs are high­er than ex­pec­ted, the gov­ern­ment helps cov­er some of the unanti­cip­ated spend­ing. When in­surers’ real-world costs are lower than ex­pec­ted, they pay in­to the same fund. It’s pos­sible, there­fore, for the gov­ern­ment to pay out tax dol­lars to in­sur­ance com­pan­ies if their ex­per­i­ence is es­pe­cially bad.

But the Con­gres­sion­al Budget Of­fice said this week that it doesn’t ex­pect that to hap­pen. It es­tim­ated that the Af­ford­able Care Act’s risk cor­ridors will ac­tu­ally save the gov­ern­ment money. In­surers will pay in about $8 bil­lion more than they take out, CBO said. Ru­bio’s of­fice calls this an in­com­plete ana­lys­is. CBO didn’t base its es­tim­ate on who has en­rolled so far in Af­ford­able Care Act plans, and, based on cur­rent demo­graph­ics, “it’s all but guar­an­teed that tax­pay­ers will be bail­ing out the in­sur­ance com­pan­ies for Obama­care, which is what we’re try­ing to stop,” a Ru­bio spokes­man says.

The goal was to coax in­surers in­to new mar­ket­places, where they would, by defin­i­tion, have to make their best guess about who their new cus­tom­ers would be. Risk cor­ridors, along with risk ad­just­ment and re­in­sur­ance, are de­signed to smooth that trans­ition. “The same pro­grams [have been] used for over 20 years in gov­ern­ment to en­cour­age private in­surers to part­ner in fed­er­al-private part­ner­ships when you don’t know the risk you’re tak­ing on in the early years of a pro­gram,” the in­dustry of­fi­cial says.

What We're Following See More »
FIRST WOMAN NOMINATED BY MAJOR PARTY
Hillary Clinton Accepts the Democratic Nomination for President
2 hours ago
THE DETAILS

"It is with humility, determination, and boundless confidence in America’s promise that I accept your nomination for president," said Hillary Clinton in becoming the first woman to accept a nomination for president from a major party. Clinton gave a wide-ranging address, both criticizing Donald Trump and speaking of what she has done in the past and hopes to do in the future. "He's taken the Republican party a long way, from morning in America to midnight in America," Clinton said of Trump. However, most of her speech focused instead on the work she has done and the work she hopes to do as president. "I will be a president of Democrats, Republicans, and Independents. For the struggling, the striving, the successful," she said. "For those who vote for me and for those who don't. For all Americans together."

COUNTER-CHANTS AT THE READY
Protesters Make Good on Threat to Disrupt Speech
3 hours ago
THE LATEST

Supporters of Bernie Sanders promised to walk out, turn their backs, or disrupt Hillary Clinton's speech tonight, and they made good immediately, with an outburst almost as soon as Clinton began her speech. But her supporters, armed with a handy counter-chant cheat sheet distributed by the campaign, immediately began drowning them out with chants of "Hillary, Hillary!"

SUFFOLK POLL
New Survey Shows Clinton Up 9 in Pennsylvania
11 hours ago
THE LATEST

If a new poll is to be believed, Hillary Clinton has a big lead in the all-important swing state of Pennsylvania. A new Suffolk University survey shows her ahead of Donald Trump, 50%-41%. In a four-way race, she maintains her nine-point lead, 46%-37%. "Pennsylvania has voted Democratic in the past six presidential elections, going back to Bill Clinton’s first win in 1992. Yet it is a rust belt state that could be in play, as indicated by recent general-election polling showing a close race."

Source:
THREE NIGHTS RUNNING
Democrats Beat Republicans in Convention Ratings So Far
12 hours ago
THE DETAILS

Wednesday was the third night in a row that the Democratic convention enjoyed a ratings win over the Republican convention last week. Which might have prompted a fundraising email from Donald Trump exhorting supporters not to watch. "Unless you want to be lied to, belittled, and attacked for your beliefs, don't watch Hillary's DNC speech tonight," the email read. "Instead, help Donald Trump hold her accountable, call out her lies and fight back against her nasty attacks."

Source:
SHIFT FROM ROMNEY’S NUMBERS
Catholics, Highly Educated Moving Toward Dems
15 hours ago
THE LATEST

Catholics who attend mass at least weekly have increased their support of the Democratic nominee by 22 points, relative to 2012, when devout Catholics backed Mitt Romney. Meanwhile, a Morning Consult poll shows that those voters with advanced degrees prefer Hillary Clinton, 51%-34%. Which, we suppose, makes the ideal Clinton voter a Catholic with a PhD in divinity.

×