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
Add to Briefcase
See more stories about...
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 »
DOCUMENTS OBTAINED BY U.S. INTEL
Putin-Linked Think Tank Developed Plan to Influence U.S. Election
2 days ago
THE LATEST

A Russian government think tank run by Putin loyalists "developed a plan to swing the 2016 U.S. presidential election to Donald Trump and undermine voters’ faith in the American electoral system." Two confidential documents from the Putin-backed Institute for Strategic Studies, obtained by U.S. intelligence, provide "the framework and rationale for what U.S. intelligence agencies have concluded was an intensive effort by Russia to interfere with the Nov. 8 election."

Source:
HELPED WIN FISA APPROVAL
FBI Relied on Dossier Allegations to Monitor Page
3 days ago
THE LATEST

"The FBI last year used a dossier of allegations of Russian ties to Donald Trump's campaign as part of the justification" to monitor Carter Page, who was then a defense adviser to the Trump campaign. "The dossier has also been cited by FBI Director James Comey in some of his briefings to members of Congress in recent weeks."

Source:
AIR FORCE SCRAMBLES JETS IN RESPONSE
Russian Bombers Fly Near Alaska
4 days ago
WHY WE CARE
A MESSAGE TO RUSSIA?
Pentagon Deploying F-35s to Europe
1 weeks ago
THE LATEST

"The Air Force is set to deploy its high-tech, fifth-generation F-35A fighter jets to Europe this weekend as part of an effort to assure U.S. allies there who are worried about Russian aggression." The new, state-of-the-art fighters will train with European air units. "The Pentagon noted that the deployment had been long planned, meaning it was not a reaction to recent increasing tensions between the United States and Russia," although a statement noted the move is part of the "European Reassurance Initiative," which began three years ago when Russia annexed Crimea.

Source:
NOT ON SCHEDULE
Tillerson Meets Putin
1 weeks ago
BREAKING
×
×

Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.

Login