Congress must continue blocking ‘risk corridor’ bailout of insurance companies


During the debate on the Affordable Care Act, the Obama administration made a series of statements that had a tremendous influence on the outcome of the legislation. President Obama told Americans that if they liked their healthcare plans, they could keep them. He said that if Americans liked their doctors, they could keep them. Americans were told that the Obamacare website would work. Americans were told it was secure. Americans were told that premiums would go down by $2,500 for a family. And Americans were told that the number of emergency room visits would drop.

Each statement was false.

We also heard the president rail against health insurance company profits, saying he would “eliminate wasteful taxpayer subsidies that currently go to insurance [companies] … when they’re [already] making a big profit.” Then-Speaker Nancy Pelosi went further, calling insurer profits “immoral.”

But just like all of the other broken promises, we now find out that Obamacare’s provisions would actually increase those “immoral” insurance company profits through a back-door bailout.

Here’s how it works. The mandates in Obamacare are driving up the price of insurance. As insurers begin to file their rates for 2016, it appears that many Obamacare plan premiums will increase by 20 percent. The law also fines people who refuse to purchase the more expensive insurance and funnels hundreds of billions of taxpayer dollars to insurers to subsidize more expensive coverage.

Last summer, the House Oversight and Government Reform Committee held a subcommittee hearing on the bailout provisions focusing on Obamacare’s reinsurance and risk corridor programs. Through the reinsurance program, insurers receive large payments to offset the cost of the vast majority of the claims for their most expensive enrollees. Seth Chandler, a law professor and insurance expert, testified that the reinsurance program reduced Obamacare plan premiums by about 11 percent on average. The program was funded by a $20 billion tax that raises premiums on the 160 million Americans with private health insurance.

Through risk corridors, insurers offering Obamacare plans that earn more than a three percent profit transfer money to insurers offering Obamacare plans that have a three percent loss. At the hearing, I released information from a Committee investigation that nearly all participating insurers expected to receive payments through the risk corridors. Our findings suggested that to cover losses taxpayers could be on the hook for about $1 billion for the 2014 plan year.

Obamacare also contained a risk adjustment program, which is common in insurance and provides insurers with protection against enrolling a less healthy population. With the standard risk adjustment program and the $20 billion back-door reinsurance program subsidy, there is no need for the risk corridor program. Taxpayers should not be forced to bail out any corporations that lose money, especially those getting so many government benefits already. Along with other conservative leaders, I called for Congress to make sure the risk corridor program didn’t increase the deficit.

Through the Committee’s investigation last year, we also learned that insurance company CEOs took concerns directly to top White House officials and lobbied for a taxpayer bailout. Behind closed doors, the president’s top lieutenants were not complaining about excessive insurer profits but rather, conspiring to deliver them more money.

We learned that the CEO of CareFirst appealed directly to Valerie Jarrett to oppose budget neutrality for the risk corridor program. He warned that imposing budget neutrality would force insurers to significantly raise premiums, by upwards of 20 percent. Valerie Jarrett relayed his concerns and warnings to the administration’s key people implementing Obamacare. The administration then changed the risk corridor funding formula, and Valerie Jarrett relayed to CareFirst’s CEO that they had given the insurers 80 percent of what they requested.

This is more evidence of how Obamacare politicized health insurance and turned insurers into scavengers at the public trough. The White House feels it must meet the needs of their new allies to ensure insurers cooperate in implementing the law.

Last year, conservatives fought against the Obamacare risk corridor bailout by demanding the program be budget neutral in fiscal year 2015. We were able to insert a provision in the government funding bill that prohibited the administration from using taxpayer dollars to pay insurers through the risk corridor program in fiscal year 2015.

And it’s a good thing, too: In May, Standard and Poor’s reported that insurers expect to receive at least 10 times more in payments from Obamacare’s risk corridors than they expect to contribute. This will likely cost American taxpayers billions of dollars.

This result is unacceptable. Conservatives must ensure that taxpayers are not forced to bail out insurers through Obamacare’s risk corridor program in the future, as we continue to fight cronyism in all forms.

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