Congressional Republicans took aim Wednesday at a piece of President Obama’s health overhaul designed to “bail out” insurers if the law’s economics do not work at the start, saying it ensures businesses make profits while taxpayers pick up the tab.
If a company’s medical claims exceed anticipated costs, the obscure bailout, known as the “risk-corridor” program, reimburses a share of those costs. It’s one of a few programs included in Obamacare to alleviate the risks to insurers between now and 2016 as they embrace the new reforms.
Sen. Marco Rubio, Florida Republican, has been warning about the potential for a government bailout for months, and he has written a bill to repeal the transitional program, saying that Obamacare is attracting too many older, sicker consumers, making it almost certain that taxpayers will have to pay out.
“It’s the entire industry that is being affected by its failures,” the senator testified to the House oversight committee.
But Democrats said the risk corridors will actually save taxpayer money and added that they were a Republican idea used in President George W. Bush’s 2003 Medicare prescription drug law.
“The risk-corridor program was a good idea during the Bush administration, and it worked,” said Rep. Elijah E. Cummings, Maryland Democrat, noting it saved taxpayers $7 billion. “But now, since these same mechanisms are part of the Affordable Care Act, Republicans argue that they are a bailout for insurance companies.”
Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, a trade group, said it was unfair to change the program now, since companies have already set premiums and consumers are enrolling in coverage plans. He said changes “would cause disruptions in the market and higher premiums for consumers.”
The GOP is hoping to rally populist anger by portraying the program as a “bailout” — a politically loaded term after the government rescued banks and auto manufacturers during the 2008-2009 financial collapse.
“I respect the fact that there are some who still hold out hope that ‘Obamacare’ will work, just like there were some in Denver this Sunday still holding out hope that the Broncos could come back and win in the fourth quarter,” Mr. Rubio said. “But no matter how you may feel about the law, we should all be able to agree that the American people should not have to pay for another taxpayer-funded bailout.”
House Republicans have spoken about repealing the risk-corridor program as a condition for raising the nations’s debt limit this month, although a top aide said Wednesday the strategy does not have enough votes from the GOP caucus.
The risk-corridor program kicks in when claims outpace projected costs by at least 3 percent. In that case, the government reimburses the insurers for half of the excess costs. If claims exceed anticipated costs by 8 percent or more, the government picks up the tab for 80 percent of additional costs.
But the government also takes in money from insurers that end up with healthy risk pools, redistributing it to insurers that did not fair as well. The Congressional Budget Office this week projected the program will take in $16 billion and redistribute only half of that.
“So where’s the bailout? There isn’t one,” said Mr. Cummings, the ranking Democrat on the oversight committee.
In a separate hearing Wednesday, CBO Director Doug Elmendorf told the House Budget Committee that the risk-corridor program should yield savings, “although we noted in our report that that is a very uncertain estimate.”