The program’s supposed to be transitional, sunsetting in 2016 after the new exchanges have had a few years to launch and then stabilize.
Emphasis on “supposed to be.”
Industry insiders told the Washington Examiner a plan to extend the Affordable Care Act’s “risk corridors” are under discussion, but that administration officials have not made a final decision…
The Obama Administration is now weighing a plan to grant an additional three-year extension for non-complaint plans on the individual market. Such a move would prevent millions of people from losing their policies in the critical weeks and months before the 2014 election.
But it would also allow people on the individual market to keep non-compliant plans beyond the risk corridor’s 2016 expiration date, leaving health insurance companies serving the exchange vulnerable to financial losses as the more healthy customers continue to stay out of the exchanges.
Health insurance companies are looking for something in exchange for the three-year extension, which will make it much harder for them to sign up healthier and younger customers. Extending the risk corridor program is part of that conversation with the White House, industry sources said.
Remember back in November when Obama was eating truckloads of crap for breaking his “if you like your plan” promise? His solution was to let insurers “un-cancel” canceled plans — but lost in the hubbub at the time was the fact that he said he’d allow it for just one year. The obvious problem with that timeline is that it means this issue will bubble up again this fall, just in time for the midterms. New solution, then: Quietly allow insurers to keep un-canceled plans in effect past the midterms, for another three years. That’s how Obama just “solved” his little electoral problem with the employer mandate, isn’t it? Three-year extensions across the board, to minimize the damage to Democrats from his pet boondoggle in November. The problem is, because the old un-canceled plans are typically cheaper than expensive new “comprehensive” ObamaCare exchange plans, the extension means insurers are suddenly looking at less revenue than they counted on all the way through 2017. That’s where the “risk corridors” come in. Assuming the Examiner’s report is true, the White House is going to make this worth the industry’s while by extending the timeline for the bailout program too. Any losses they suffer in 2017 would, presumably, be partly offset by Uncle Sam even though the “risk corridor” is supposed to have terminated by then. Your tax dollars will buy insurers’ complicity in yet another illegal extension.
Bob Laszewski kinda sorta saw this coming, by the way. Last month he published a post arguing that, for all its faults, ObamaCare won’t cause a death spiral in the insurance industry anytime soon. The reason: The “risk corridor” program. Since Uncle Sam’s on the hook for any heavy losses in the industry, insurers are under no immediate pressure to raise premiums, the potential trigger of a death spiral. They can keep premiums artificially low — at least for a few years, until the “risk corridor” sunsets. Laszewski figured insurers would give the White House one more chance next year to get their act together on implementation and to start signing up the uninsured en masse; if they failed, he said, he expected companies to start parachuting out of the exchanges in 2016 before the “risk corridor” program expires. Which is to say, it’s very much in the White House’s interest to keep the program in effect, if it can, to keep insurers from abandoning the exchanges, especially if HHS has reason to think the risk pools they’re projecting will be less young and healthy than they had hoped. (And they do have such a reason at the moment.) The last thing Democrats need in a presidential election year is “Insurers give up on ObamaCare” headlines. Promise them some more sugar and you can avoid that. Maybe.
It seems naive at this point to ask whether the White House could extend the “risk corridor” unilaterally or whether that would be illegal. If they want to do it, they’ll do it regardless. O’s theory in issuing periodic delays or extensions for ObamaCare’s provisions is that, during the law’s transitional phase, he has some latitude legally to tweak implementation to make it go more smoothly. Extending the “risk corridors” past 2016, though, would mean the “transitional” phase had lasted past the end of his own presidency. It’s dubious, but it’s also in character. Here’s a question, though: Why would insurers leak this info now, when Marco Rubio’s trying to build support within the GOP for a bill to repeal the “risk corridor” program? He’s had little luck getting it on the leadership’s radar but his luck could change now that rumors are swirling that the bailout provisions might be extended into 2017 and beyond. The recent CBO numbers that found that the “risk corridor” could actually make money for taxpayers is a problem for the GOP, but (a) CBO’s numbers can be challenged and (b) CBO assumed that the “risk corridor” would be gone by 2016. Even if O decides to unilaterally extend the program, a new Republican Senate next year could join forces with some red-state Dems and Boehner’s House majority to repeal it, forcing Obama to either acquiesce in the repeal or to veto it and be seen as singlehandedly defending indefinite bailouts for insurers. Very strange that insurance industry sources, who stand to benefit, would be blabbing about this now.