December 1, 2015
Will Rubio’s Measure Undermine ACA?
by Alan Katz
Sen. Rubio is trying to keep the Obama administration from fully reimbursing insurers with excessive claims under the ACA.
Republicans stated goal is to “repeal and replace” the Patient Protection and Affordable Care Act. That hasn’t happened and won’t at least through the remainder of President Barack Obama’s term. So a secondary line of attack is to undermine the ACA. And Sen. Marco Rubio has had success in that regard.
As reported by The Hill, Sen. Rubio accomplished this feat by weakening the ACA’s risk corridors program. Whether this is a long- or short-term victory is being determined in Washington now. We’ll know the answer by Dec. 11.
President Obama and Congress recognized that, given the massive changes to the market imposed by the ACA, health plans would have difficulty accurately setting premiums. Without some protection against under-pricing risk, carriers’ inclinations would be to price conservatively. The result would be higher than necessary premiums.
To ease the transition to the new world of healthcare reform, the ACA included three major market stabilization programs. One of them, the risk corridors program, as described by the Kaiser Family Foundation, “limits losses and gains beyond an allowable range.” Carriers experiencing claims less than 97% of a targeted amount pay into a fund; health plans with claims greater than 103% of that target receive funds.
The risk corridor began in 2014 and expires in 2016. As drafted, if payments into the fund by profitable insurers were insufficient to cover what was owed unprofitable carriers the Department of Health and Human Services could draw from other accounts to make up the difference.
Sen. Rubio doesn’t like risk corridors. He considers them “taxpayer-funded bailouts of insurance companies at the Obama administration’s sole discretion.” In 2014, he managed to insert a policy rider into a critical budget bill preventing HHS from transferring money from other accounts into the risk corridors program.
The impact of this rider has been profound.
In October, HHS announced a major problem with the risk corridors program: Insurers had submitted $2.87 billion in risk corridor claims for 2014, but the fund had taken in only $362 million. As a result, payments for 2014 losses would amount to just 12.6 cents on the dollar.
This risk corridor shortage is a major reason so many of the health co-ops established under the ACA have failed and may be a factor in United Health Group’s decision to consider withdrawing from the law’s health insurance exchanges. (United Health was not owed any reimbursement from the fund but likely would feel more confident if the subsidies were available).
The Obama administration certainly sees this situation as undermining the Affordable Care Act. In announcing the shortage, HHS promised to make carriers whole by, if possible, paying 2014 subsidies out of payments received in 2015 and 2016. However, the ability to do so is “subject to the availability of appropriations.” Which means Congress must cooperate.
That brings us back to Sen. Rubio’s policy rider. It needs to be part of the budget measure Congress must pass by Dec. 11 to avoid a government shutdown. If the policy rider is not included in that legislation, HHS is free to transfer money into the risk corridor program fund from other sources.
Sen. Rubio and other Republicans are pushing hard to ensure HHS can’t rescue the risk corridors program, claiming to have already saved the public $2.5 billion from a “crony capitalist bailout program.” Democrats and some insurers, seeing what’s occurred as promises broken, are working just as hard to have the rider removed.
By Dec. 11, we’ll know whether the ACA is further undermined or bolstered.