Will Republicans Allow an Obamacare Bailout?

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One of the few bright spots in the government-funding bill passed last December was the inclusion of a provision that barred the Obama administration from using taxpayer dollars to bailout a little-known Obamacare program. Known as “risk corridors,” the program receives contributions from health insurance companies that make money from plans sold on the exchanges required by the law and redistributes it to those that experience losses.

Congressional Republicans had targeted the program for repeal. In November 2013, Sen. Marco Rubio, R-Fla., introduced legislation, the Obamacare Bailout Prevention Act, to do just that. “The American people are sick of Washington picking winners and losers, especially since the chosen losers often end up being taxpayers who foot the bills for Washington’s mistakes,” Rubio said at the time. “Washington’s bailout culture must end, and eliminating Obamacare’s blank check for a bailout of insurance companies is a common sense step to protect taxpayers when Obamacare fails.”

Lobbyists for insurance companies worried about congressional action against the program, which, according to the administration’s propaganda, is supposed to be deficit-neutral. Without the program, insurers’ lobbyists said, premiums would rise and drive consumers away from the exchanges, possibly leading to a dreaded “death spiral.” While the bill didn’t see any action in the Senate, Rubio reintroduced it in January at the beginning of the new Congress.

The language prohibiting the use of taxpayer funds for the risk corridors program that was included in the government-funding bill applied only to fiscal year 2015. It would have to be inserted into the bill for fiscal year 2016 for it to continue to apply. This is where it gets interesting. Insurers have filed more in claims than money that’s available in the program.

“On October 1, 2015, the Centers for Medicare and Medicaid Services announced the total of collections and payouts under the risk corridor premium stabilization program for 2014. CMS announced that insurers have submitted $2.87 billion in risk corridor claims for 2014. Insurers only owe, however, $362 million in risk corridor contributions,” Health Affairs reported in October. “Thus payments in 2015 for 2014 will be paid out at 12.6 percent of claims, assuming full collections of contributions owed.”

In other words, the risk corridors program faces a more than a $2.5 billion shortfall. The only way to fill the gap is to transfer funds – i.e., taxpayer money – to cover the payments owed to insurers.

The House of Representatives is in the midst of working on the government-funding bill for fiscal year 2016. The current funding agreement expires on Friday, though lawmakers will likely pass an extension to give themselves more time to hammer out a framework. But without a specific language prohibiting the administration from using taxpayer money to make the risk corridors payments, taxpayers could be on the hook for what is, ostensibly, a $2.5 billion Obamacare bailout.