Yesterday, Bloomberg News health-care reporter Alex Wayne noticed that the new White House budget includes $5.5 billion in potential payments to insurance companies that suffer losses under Obamacare—a scenario that Republicans such as Florida Senator Marco Rubio have branded a “bailout.”
Last November, Rubio introduced legislation to abolish “risk corridors” contained in the Affordable Care Act, which are essentially temporary shock absorbers that help insurers transition to the new system by limiting the risk they’ll face in setting prices for a new market. As I’ve explained, risk corridors function a lot like Major League Baseball’s profit sharing: Insurers that wind up with a healthier-than-anticipated applicant pool and lower costs will turn over some profits to the government, which in turn will pay money to insurers that end up saddled with costlier-than-expected applicants.
Given the law’s rocky rollout and Obama’s decision to let young, healthy people temporarily keep their bare-bones plans (a decision he extended on Wednesday for another two years), it stands to reason that there may be more “losers” among insurers than previously anticipated—and that this might warrant a net payout from the government. “I do think both factors tilt the odds toward the government sending more money to insurers under risk corridors than they’re taking in,” says Larry Levitt, a health-care expert at the Kaiser Family Foundation. Given the political potency of the “bailout” label, Rubio looked to be onto something, and the many Republicans who repeated the charge seemed to agree.
The White House seems to agree, too. In a call with reporters late Wednesday, senior administration officials announced that they’re adjusting the risk corridor program to be “budget neutral.” But they haven’t made clear how they’ll make sure enough money will come in from insurers to avoid taxpayer-funded payments. White House officials presented this change as just another minor adjustment to help insurers and customers adapt to the new law. Nothing to see here, folks! What this change really does is blunt Rubio’s attack by apparently guaranteeing that an “Obamacare bailout” cannot occur.
That didn’t stop Rubio from offering a parting shot. “The Obama administration all but acknowledged today that Obamacare’s risk corridors are open-ended and needlessly expose taxpayers to bailing out health insurance companies,” he said in a statement. “Given the Obama administration’s track record of bending, breaking, and rewriting Obamacare, they should make this move permanent through the legislative process.” Whether or not rejiggering the risk corridors helps insurers or their customers, it should go a long way toward helping embattled Democrats.