February 19, 2014

THESE ARE NEVER HAPPY SURPRISES, ARE THEY? Obamacare’s Latest Surprise for Taxpayers?

Industry sources tell the Washington Examiner’s Susan Ferrechio that the Barack Obama administration is thinking of extending the Affordable Care Act’s “risk corridors,” the federal reimbursement program for health-insurance companies that lose money by participating in the newly created health-care exchanges. This is not the first time we’ve seen this idea floated, and frankly, believing that the administration is considering it is all too easy.

If you’re not familiar with the risk-corridor program, read what I’ve written in the past. Basically, there are three temporary risk-adjustment programs to help insurers transition into the new marketplaces. One of them — a sort of reinsurance program, called the risk corridors, that offsets losses when claims are greater than 103 percent of projections and collects money from insurers whose claims are less than 97 percent of what they expected — is not designed to be revenue-neutral. That means that if the insurance pool is a lot sicker than initially expected, the federal government could end up transferring a bunch of money to the insurance industry.

Because a lot of insurers seem to be saying that they’re going to lose money on their exchange policies this year, that’s a little worrying for the U.S. taxpayer.

But not that worrying, because the corridors are supposed to expire in three years. If it’s true that the administration is seriously considering extending them, that raises some disturbing possibilities.

Hey, Democrats don’t represent the taxpayers, they represent the tax-consumers, so it’s all fine.

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