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Obamacare’s Risk Management Program Could Cost Billions, experts say

Federal healthcare exchange

Obamacare’s Risk-Management Programs Could Cost Billions, Experts Tell House

Marguerite Bowling / 

Obama administration officials insisted that Obamacare’s risk-management programs are temporary and budget neutral, but others at a hearing of the House Committee on Oversight and Government Reformtoday argued the programs will be a boondoggle for taxpayers.

“All of you ought to be very concerned about the way the risk corridors program is being implemented” said Seth Chandler, a law professor at the University of Houston, told lawmakers.

The Affordable Care Act imposes new rules on individual and group health plans that make it difficult for insurers to predict claim costs and set premiums. As a result, the law built in risk-mitigating programs for insurers that sell health plans in the Obamacare exchanges.

HHS officials have said the programs encourage competition, but Obamacare opponents argue the programs amount to taxpayer-funded bailouts for insurers who participate in the exchanges.

The risk-management programs include:

  • A temporary “reinsurance” provision that subsidizes individual market plans with a greater share of higher-cost enrollees.
  • A temporary “risk corridor” program that establishes a government-approved range for insurer losses and profits.
  • A permanent “risk adjustment” program that transfers money among insurers to account for the possibility some carriers will insure a higher or lower share of sicker, costlier customers.

“The risk corridors program interact with all programs [in Obamacare] and protect insurers as they transition to this new market,” Dr. Mandy Cohen, an acting deputy and director at the Centers for Medicare and Medicaid Services, testified at the hearing that often veered into other Obamacare hang-ups.

Cohen said the risk corridors program would run as budget neutral, but Chandler said taxpayers could be on the hook for paying out billions of dollars to insurers. “It’s unlikely to be a break-even proposition,” Chandler said.

Democratic committee members said the risk corridor programs aren’t a new idea and were set up in a similar fashion for the Medicare Part D drug coverage that was signed by President George W. Bush. Cori Uccello, testifying for the American Academy of Actuaries, affirmed that Medicare Part D’s risk corridors program were more generous than the ones in Obamacare.

But Edmund Haislmaier, a senior research fellow in health policy with The Heritage Foundation, said the differences in the two government health programs do not make the comparison applicable for the current debate.

“Medicare Part D was an entirely new product and entirely new market” that offered stand-along drug coverage to seniors, Haislmaier said. Although Obamacare imposes new rules and restrictions, insurers were not asked to create a new market for health plans that have long existed, he added.

Meanwhile, Cohen said proposed rates for the Obamacare exchanges in 2015 are expected to increase “in the single digits.”

“I think if you look at the rate increases before [Obamacare] and what they were historically, we’re very glad,” she said.