Podcast: Graham Explains the End of Obamacare’s Risk Corridors
One of NCPA’s successes in health policy last year was to influence the Congress to limit Obamacare’s “risk corridors”. This was the part of the 2010 Affordable Care Act that instituted an unlimited taxpayer liability to protect health insurers from losing money in Obamacare’s exchanges for three years.
Sean Parnell of the Heartland Institute interviewed Senior Fellow John R. Graham about the effect of the lame-duck Congress eliminating this unlimited taxpayer liability. You can listen to the 20-minute podcast here.
For a written description of this important win, please see here.
John, I am going to be a stubborn cookie on this issue. I think that you have exaggerated any problems with the federal reinsurance-risk adjustment program, with the apparently sole aim of scoring a victory over the ACA.
Exhibit #1 is a serious article from Health Affairs about risk adjustment, corridors, and reinsurance in Medicare Part D.
http://content.healthaffairs.org/content/28/1/215.full
Volume 28, No 1, pp 215-225 by John Hsu at al.
Here is my point, perhaps repetitive by now but I am sticking to it.
Why are federal supports to insurers a good thing for Medicare Part D, and a bad thing for the ACA?
A real cynic would say that George Bush sponsored Medicare Part D and it covers seniors, while Obama sponsored the ACA and it mainly helps the working poor.
I am open to a less cynical explanation. Thanks as always for your posts. I rarely disagree as much as I do on this one.
Thank you. I think I might have to schedule a study of all the different risk-mitigation mechanisms in U.S. health care! Until then, let me re-iterate that I advocated against the risk corridors, but not the risk adjustment nor the re-insurance (which costs taxpayers $25 billion). It was mostly because of the open-ended taxpayer liability in the law.
John R. Graham, What an informative post, thanks!
Based on the number of people signing up for health insurance on the public exchanges, the amount of taxpayer money likely to be paid out for risk corridor losses in unlikely to exceed the low to mid-single digit billions of dollars per year for up to three years. In the scheme of things, I don’t think that’s an unreasonable price to pay to allow the industry to gain experience in pricing policies that must be sold on a guaranteed issue as opposed to an underwritten basis.
After three years, the health insurance industry should have enough actual experience with this to function on its own without risk corridor protection. As a taxpayer, I have no problem with it.
Barry you are absolutely right.
Every nation that uses multiple insurers plus guaranteed issue — including Germany, Switzerland, Denmark, and probably several others — relies on risk adjustment.
As you point out, the numbers involved in risk corridors are a tiny percentage of federal health care spending.
What does John want here, is my underlying question. Does he want the private insurers to lose money and so spurn the ACA, so that the ACA fails? Does he want to get away from guaranteed issue?
These are not horrible goals, I will listen to a defense of them. Just have not heard the real goal here.
And there is risk mitigation in Medicare Advantage and Medicaid Managed Care Organizations. So, no, I am not opposed to risk mitigation. NCPA has never been in favor of community rating and guaranteed issue. Nevertheless, if those exist, there has to be risk mitigation.
However, the risk mitigation in Obamacare needs significant improvement. Plus the legislative justification for the risk corridors was weak and poorly written.