Ever since the housing market collapse, nothing stokes the flames of public outrage quite like the phrase "government bailout." It's become the condemnation of choice for both parties when faced with a policy they don't like. Lately, conservatives have been arguing that an obscure provision of the 2010 healthcare law would provide a taxpayer bailout to insurance companies that don't charge high enough premiums. Funny, but they didn't have a problem with that concept when it was used to help launch Medicare's prescription drug program under (Republican) President George W. Bush. Maybe that's because it isn't really a bailout.
The specific provision is called "risk corridors," and it's one of three efforts in the Affordable Care Act to help insurers manage the transition from the bad old days — when they could deny coverage to people or charge them higher rates based on their preexisting conditions — to a new system under which every applicant is guaranteed coverage and premiums don't vary according to the policyholder's health. That's a huge leap for insurers, which may have a hard time predicting their future customers' health and medical bills accurately enough to set sufficient rates. That's why the government set up the corridors for three years, covering some of an insurer's cost if its medical bills come in higher than projected. And to offset that expense, the government will collect an equal percentage of the profits made by an insurer whose medical payments turn out to be lower than projected.
When Medicare asked insurers to start offering prescription drug coverage, the same mechanism was included for much the same reason: The government was pushing insurers to take on a new risk that they weren't fully ready to gauge. Over time the government withdrew its backstop, leaving insurers to deal with the challenges increasingly on their own. Based on that experience, the Congressional Budget Office projected that the corridors in the healthcare law would pay for themselves. Whether they do, of course, depends on whether insurers sign up the pool of customers they expected to attract, which remains to be seen.
Rather than waiting to find out how things go in the coming year, Sen. Marco Rubio (R-Fla.) and Rep. Tim Griffin (R-Ark.) have introduced bills in the Senate and House to repeal the risk corridors. That would amount to a bait-and-switch for insurers — some of them new to the individual market — that have already signed up customers for 2014. Knowing that Senate Democrats aren't likely to pass such a bill, some Republicans are eager to attach the provision to a must-pass bill to raise the debt limit in February. We can only hope that GOP leaders learned from last year's disastrous government shutdown that such hostage-taking doesn't end well. Risk corridors have worked in the past to the public's benefit, not the taxpayers' regret, and Congress should give them the chance to work again.Copyright © 2015, The Baltimore Sun