John R. Graham, a senior fellow of the National Center for Policy Analysis, recently lauded the elimination of taxpayers’ liability for risk corridors made available to health insurers participating in the public exchanges. He describes it as “a significant win for taxpayers.”

Risk corridors are one of three risk-management programs created under the Affordable Care Act aimed at protecting consumers by stabilizing premiums during the landmark law’s initial years of implementation. The other two involve reinsurance and risk adjustment, the latter guarding against adverse selection.

Not surprisingly, the America’s Health Insurance Plans trade group blasted the lame-duck Congress for not appropriating risk-corridor funding next year – a fight that “reveals the strained relationship between the health insurance industry and Republican lawmakers,” according to Graham. “This is an odd fight for health insurers to pursue.”

Both the U.S. House and Senate recently addressed the issue in legislation that combined a long-term omnibus spending bill and shorter-term continuing resolution into something called a “cromnibus.” The action, which was meant to fund the federal government through next year, included what he termed “small but important steps to repeal Obamacare,” with the risk-corridor movement serving as the “most important” of those achievements.

Graham recalled his testimony last June before the House Oversight and Investigations Committee during which he sounded warnings about risk corridors. The recent result – an attempt at “budget neutrality” – exceeded his expectations.

Financial assistance is available to insurers if their HIX claims cost at least 3% more than their premium revenue and it would be funded with payments from insurers that earn a profit of 3% or more. The temporary program has been called anything from a “subsidy” and “safety valve for consumers and insurers” to a “taxpayer bailout.”

Noting that risk corridors expire after 2016, Graham believes it’s “highly unlikely” that the newly Republican-controlled House and Senate would allow for risk-corridor appropriations in the future. “Even if a pro-Obamacare Congress is elected in November 2016, the risk corridors will have expired by the time that Congress takes power,” he wrote in the blog.

Another point he made is that “risk corridors are a marginal business issue for insurers,” adding that Citigroup health care analyst Carl McDonald estimated U.S. taxpayer liability would have been a tad north of “$1 billion on premiums of about $50 billion in the individual market this year.”


Register or login for access to this item and much more

All Employee Benefit Adviser content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access