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Marco Rubio, Florida Senator

CBO report undermines GOP calls for repeal of risk corridor program

By Paul Demko
Posted: February 5, 2014 - 3:15 pm ET

Republicans are aggressively attacking the Patient Protection and Affordable Care Act's risk corridors, a mechanism intended to soften the financial risk to insurers that sell plans in the first years of the exchanges, but new projections by the Congressional Budget Office may suck the air out of that fight.

House Republicans have signaled they may attempt to tie a one-year increase to the debt ceiling to a repeal of the program, which critics are describing as a bailout for insurance companies doomed to lose badly because of the failed rollout of the new marketplaces.

Sen. Marco Rubio (R-Fla.) was the star witness at a Wednesday hearing on the issue before the House Committee on Oversight & Government Reform.

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The risk corridors program limits the amount of money insurers can make or lose during the first three years of selling products on the exchanges. Plans whose members' healthcare claims fall below targets must pay into an HHS fund, while those that see higher-than-expected costs will get paid a portion of the difference.

Rubio argued that insurers are under growing financial duress because the customer pool for the government-run marketplaces is proving to be smaller, older and sicker than anticipated. “Soon they will be coming to Washington for their bailout to cover their losses,” Rubio warned the committee. “We should all be able to agree that the American people should not have to pay for another taxpayer funded bailout.”

Rubio has introduced legislation to repeal the risk corridors program, and a companion measure has been offered by Rep. Tim Griffin, R-Ark.

But a report released by the Congressional Budget Office on Tuesday undermined suggestions that insurers are likely to receive a windfall from taxpayers through the risk corridors program. In fact, the CBO projected that the program will result in an $8 billion surplus for the federal government over the next decade.

That's even after taking into account an estimated $500 million in revenue losses that insurers are expected to incur as a result of changes to the law that the Obama administration has announced in recent months, such as allowing individuals with canceled plans to qualify for a hardship exemption to the individual mandate.

The CBO's estimate is likely based in part on the experience of the Medicare Part D prescription drug program, which included a similar program to entice companies into the marketplace without incurring undue financial risk. As highlighted by Edwin Park, vice president for health policy at the left-of-center Center on Budget and Policy Priorities, Part D insurers have paid money to Medicare every year since the program began, a total of $7 billion between 2006 and 2012.

Democrats seized on the CBO report at Wednesday's hearing as evidence that Republican's gloomy predictions about the risk corridors program are misguided. “So where's the bailout?” asked Rep. Elijah Cummings (D-Md.), the ranking Democrat on the Oversight & Government Reform Committee. “There isn't one.”

It remains to be seen, however, whether the issue will ultimately become part of negotiations over the debt-ceiling extension, which needs to be resolved prior to the end of the month in order for the federal government to avoid default.

Republican leaders so far have failed to win enough support from members to attach a repeal of the risk corridors as a condition to accepting a rise in the debt limit, according to a Bloomberg News report citing party aides.

Follow Paul Demko on Twitter: @MHpdemko

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