ObamaCare Risk Corridors

ObamaCare created “risk corridors” to spread the risk of taking on the uninsured between insurers and taxpayers. The profitable insurers pay in each year, the unprofitable one’s take money out, the government puts a little money in the pot, and everyone except the GOP is happy.

Essentially risk corridors work like this: Risk corridors keep the price of premiums low by offsetting risk that would have been built into premium prices, this allows insurers to offer lower priced plans, which keeps plans “affordable” (especially with tax credits).

Risk Corridors affect ObamaCare in a Few Important Ways

• ObamaCare’s tax credits are based on the “cost of the second lowest silver plan” in a given state. So if that plan is cheap, then tax credits are more generous. If that plan is expensive people who get subsidies feel the burn.
• Risk corridors prevent insurers from “playing scared”. Without the corridors insurers would simply offer cheaper lower end plans and less higher end plans, designing plans to ensure a profit despite the new influx of sick people. As it turns out a lot of sick people signed up and not enough healthy ones, so this already has healthcare giants like UnitedHealthcare rethinking their ObamaCare strategy.
• The higher the cost of plans, the more people qualify for exemptions (that means less revenue and that means more deficit / debt problems as a nation).

Marco Rubio Travels to the Past to Save America By Breaking ObamaCare and Making Everyone Pay for it?

So why are we even talking about this?

Sen. Marco Rubio (R-FL) put a section in a 2014 budget that didn’t have an impact until insurers who had lost profits (including the one with the most ObamaCare customers UnitedHealthcare) went to go get their risk corridor money. It turned out about $2.5 billion in risk corridors payments to insurers were not there to be paid out. It’s not that they can never have the money, it’s more like there is a Rubio wrench thrown in the works that must now be navigated around.

So What Are the Consequences of This?

Unfortunately, as we just mentioned above risk corridor payments are actual vital to the law functioning correctly, people being able to afford health plans, and the insurance market not collapsing.

The ACA is self sustaining somewhat as is, but in it’s infancy still needs mini-ballouts to keep the insurers form imploding along with the rest of the system.

The GOP frames the insurers needing money as crony capitalism, the insurers are either faking it well or are actually panicking over facing mostly un-padded loses, that means they will be offering higher premium plans, that means less affordable coverage, that means more exemptions, that means less revenue.

The above means more people angry about ObamaCare. ObamaCare has Obamas name it. Obama is a Democrat. And… yes, this is the plan today and has been since the President walked into office with ideas of reforming healthcare.

Then the questions are:

• What is the morality of Rubio using these tactics to purposely break a part of the ACA for political gain? Who else is behind this?
• What is the morality of us bailing out insurers by padding their profit? What is the intention here?
• What is the morality of leaving millions without expanded Medicaid, the middle class with unaffordable premiums, and our children with debt all in the name of politics?
• Shouldn’t we be focusing on what is best for Americans? Isn’t that finding a way to keep them healthy together, rather than using them as political pawns?

The Part of the Law This is From

Just so we are all clear. Risk corridors have been part of the plan since day 1. The budget that blocked them was from 2014. And this is all coming to a head this week. The ACA isn’t broken, but it’s another wrench in healthcare reform machine that has been taking a strategic beating since it’s inception.

Here is the wording from the law:

Part V—Reinsurance and Risk Adjustment

Sec. 1341. Transitional reinsurance program for individual and small group markets in each State. For 2014, 2015, and 2016, requires States to establish a nonprofit reinsurance entity that collects payments from insurers in the individual and group markets and makes payments to such insurers in the individual market that cover high-risk individuals. Requires the Secretary to establish Federal standards for the determination of high-risk individuals, a formula for payment amounts, and the contributions required of insurers, which must total $25 billion over the 3 years.

Sec. 1342. Establishment of risk corridors for plans in individual and small group markets. Requires the Secretary to establish risk corridors for qualified health plans in 2014, 2015, and 2016. If a plan’s costs (other than administrative costs) exceed 103 percent of total premiums, the Secretary makes payments to the plan to defray the excess. If a plan’s costs (other than administrative costs) are less than 97 percent of total premiums, the plan makes payments to the Secretary.

Sec. 1343. Risk adjustment. Requires States to assess charges on health plans with enrollees of lower-than-average risk, and to provide payments to health plans with enrollees of higher-than-average risk. Risk adjustment applies to plans in the individual and small group markets, but not to grandfathered health plans.