Washington’s Inaccurate Way with Words
In assembling the so-called “CRomnibus” legislation that will set federal government spending levels until September 2015, U.S. House of Representatives appropriators have included language in the measure that would significantly affect a provision in the Affordable Care Act intended to maintain health insurance stability and affordability.
Some lawmakers want to curb funding for the aspect of the ACA known as risk corridors, saying it represents a taxpayer “bailout” for health insurers.
One would have to do some historical digging to see if the word “bailout” has ever been used quite so incorrectly. In no way whatsoever are the risk corridor provisions being attacked in the “CRomnibus” a handout to health insurance companies. Rather, they are valuable protections for coverage-purchasing consumers.
Here’s why risk corridors are so necessary. For the health insurance industry, the implementation of the Affordable Care Act was essentially a leap into the great unknown. With the new law barring medical underwriting – basing insurance premiums, in part, on a consumer’s health status – health insurers simply did not know whether the population enrolling in plans through the ACA coverage exchanges would be less healthy and prone to using more, and more expensive, healthcare services.
Risk corridors are simply temporary (they run through 2016) protections against significant unforeseen financial losses until the ACA marketplace can be better defined and understood. Without these protections, consumers face the danger of rapidly escalating costs. Risk corridors bring stability to a new, uncharted health insurance environment.
Oh, by the way, this tool has been used quite effectively in the Medicare Part D prescription drug program – without a whisper of political controversy.
Conservative analyst Yevgeniy Feyman described the importance of risk corridors well in a Forbes column, noting that “Risk adjustment mechanisms get you the buy-in of insurers, but they also help keep premiums at manageable levels while insurers develop enough experience to properly price plans on their own. This helps encourage people to enroll in these plans, which in turn helps insurers develop the necessary pricing experience – resulting in a virtuous cycle.”
It should also be noted that the lawmakers and political advocates who want to take an ax to the risk corridors are doing so after health insurers have already set premium rates for 2015. They want to, in essence, change the rules in the middle of the game.
The losers, though, wouldn’t be the health insurance companies or the Obama administration. Rather, consumers would be taking a direct hit to their checking accounts.
And if this ill-conceived action takes effect and millions of American households suffer financially for it, who exactly is going to bail them out?