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CBO Reports That Health Law Provision Called ‘Bailout’ By GOP Will Raise $8B

By Mary Agnes Carey

February 5th, 2014, 5:00 AM

New findings from the Congressional Budget Office may make it harder for Republicans to portray a provision in the health law designed to limit insurers’ losses and gains as a bailout for the industry.

The House Oversight and Government Reform panel is scheduled to have a hearing Wednesday examining the law’s “risk corridors,” which limit plans’ exposure to possible upheavals caused by the transition to marketplaces that require health insurers to accept all comers, no matter how poor their health.  Witnesses include Sen. Marco Rubio, R-Fla., who is sponsoring legislation to repeal the risk corridors, which he and the bill’s co-sponsors have called a “blank check for a bailout of insurance companies.”

Under the program, actual claims are compared to the claims insurers anticipated when they set their premiums.  The government collects money from plans with lower-than-expected claims to make payments to plans with higher-than-expected claims.  If claims exceed expected amounts,  the government makes up some of the difference.

The CBO’s budget outlook, released Tuesday, projected that the risk corridor program will actually produce $8 billion over its lifespan rather than cost taxpayers money.  Previously the nonpartisan agency had not counted the program as a cost or benefit to the government because it assumed that payments from insurers would offset payments made to other insurers.

That previous estimate, however, was made before President Barack Obama’s announcement in November that some people in the individual market who received cancellation notices could keep their health plans for another year. Some analysts have feared that change may keep healthy people out of the online marketplaces, which could increase premiums next year. Critics have said the flawed rollout of the health law, along with its design, meant the government would end up paying more money than it would ever recoup from insurers.

But the CBO reaches a different conclusion.  In its report, released Tuesday, CBO said that in a similar program set up as part of the Medicare prescription drug program, collections from insurers exceeded payments to health plans, yielding net collections that have averaged about $1 billion a year, or between 2 percent and 3 percent of total covered costs for drugs under Part D.

“That experience suggests that plans’ premium bids in the [Affordable Care Act’s] exchanges will probably exceed their costs by a few percent” despite technical issues in the rollout, CBO said.

CBO also found that the health law’s two other programs to help insurers manage risk — risk adjustment and reinsurance —  are estimated to have no budget impact.

Don’t expect the CBO’s findings to stop the GOP’s campaign to repeal the law’s risk corridors. A Congressional Research Service memo  released Tuesday by House Energy and Commerce Committee Chairman Fred Upton, R-Mich., raises questions about the administration’s ability to make payments to insurers without a budget appropriation from Congress allowing them to do so.

10 Responses to “CBO Reports That Health Law Provision Called ‘Bailout’ By GOP Will Raise $8B”

  1. stan says:

    Did you expect anything less from heartless and spiteful Tea Party Republicans? Is there any wonder why the entire GOP is fractured and divided? With the latest New Jersey Bridgegate scandal, is there any wonder why they can’t find qualified candidates to make a serious run for President? I am ashamed to call myself a Republican! The GOP is beyond help. They have lost the women vote. They have lost the Latino vote. With their constant and overt hatred for President Obama, they lost the black vote. With GOP governors all across America making drastic cuts to education, they have lost the college student vote. With their constant assault on Obamacare, they have alienated the uninsured. What more can Republicans do to ruin their once great reputation? Disgusting!

  2. Shoreman2 says:

    Think Stan has issues. The eight billion is a tax on the middle class and hard working union members not mana from heaven

  3. Ray says:

    Don’t be silly guys, this isn’t a tax! It’s simply a fee assessed on carriers for the sale of insurance products that is paid by the consumer and transmitted to the government. That sounds nothing like a tax, and it certainly isn’t costing taxpayers any money. It only costs insurance policyholders money, and it’s not like all tax payers are forced to have insurance.

    Sarcasm aside, clearly, this is a tax, payed by taxpayers, that is both providing a bailout the the insurance companies and providing billions in revenue to the government. Every last cent of which is funded by a fee charged to Americans for a product they are forced to purchase, or face paying a different tax.

  4. killroy71 says:

    Stan provided a useful reality check. Aside from which, Ray, EVERY business cost is paid for by consumers. Superbowl ads are paid by consumers (since I don’t drink Bud or buy Jags, I can avoid some of that). Drug ads are paid for by consumers. Of course fees levied by govt on health insurers, and every other kind of business are paid by consumers. We are paying for all of it, don’t kid yourselves.

  5. Tibor Myler says:

    “The CBO’s budget outlook, released Tuesday, projected that the risk corridor program will actually produce $8 billion over its lifespan rather than cost taxpayers money.”

    Yes, please read this again.

  6. jackie says:

    Think Stan has issues? Think Shoreman is a Republican! No doubt! Got all the signs. No ideas, just criticism.

  7. Herman says:

    “Think Stan has issues? Think Shoreman is a Republican! No doubt! Got all the signs. No ideas, just criticism.”

    Where are your ideas, Jackie? Hard to mount a strong defense when your only “two cents” is also just criticism. Seems like the prevailing idea here is that the government should keep its nose out of the affairs of private industries. But that’s much easier said than done now that the ACA is underway.

  8. DAVE says:

    I agree wholeheartedly with Stan. I now consider myself a former Republican. Although I have voted Republican most of my adult life, I may never again do so. The political party that I used to consider “my party” has become vindictive, hateful, stupid and without direction. Instead of policy initiatives, they put forth sound bites. Instead of proposing programs, they snipe at and criticize every policy initiative from the other side. By becoming the “hate Obama” party, they have abandoned all other principals, and now stand for nothing at all. And now that they have for so long cultivated and catered to the votes of idiots, there is no longer a path back to being a party of reasonable ideas and policies, or a party that understands how to govern instead of trying to throw a monkey wrench into government.

  9. jackie says:

    “Where are your ideas, Jackie? Hard to mount a strong defense when your only “two cents” is also just criticism. Seems like the prevailing idea here is that the government should keep its nose out of the affairs of private industries. But that’s much easier said than done now that the ACA is underway.Where are your ideas, Jackie? Hard to mount a strong defense when your only “two cents” is also just criticism. Seems like the prevailing idea here is that the government should keep its nose out of the affairs of private industries. But that’s much easier said than done now that the ACA is underway.

    My ideas? Okay! Try this! I consider the ACA a failure because it continues to allow corrupt private insurance companies to control America’s healthcare system. If the ACA has any value whatsoever, it’s that the ACA started a process that will not end until we eventually have full-blown universal single-payer healthcare just like every other industrialized nation on earth. Every other industrialized nation around the globe has socialized government funded healthcare for half the cost as America. These industrialized nations saw the light decades ago. They figured it out long before it became a problem. Not America! America remains in the dark ages when it comes to healthcare delivery for “all” of its citizens. Does America have the most innovative medical procedures and treatments in the world? Yes, but only if you can afford them. Fact is, over 50 million Americans can’t! Answer this question Einstein. Is having the most advanced forms of healthcare procedures and treatments in the world how you define success when over 50 million people still can’t access those procedures and treatments? Only a moron defines healthcare success that way! If that is what you call success, you are nuts! Oh, did I mention that those Americans lucky enough to afford health insurance pay twice as much as anyone else on the face of the earth, huh? Duh!

  10. Herman says:

    I don’t think anyone here is defining the American healthcare system as successful. Obviously it’s flawed, otherwise we wouldn’t be having this debate. But it seems there are two general schools of thought on how healthcare costs should be reduced.
    The first is to introduce a single-payer system, which would ensure health insurance for all. That’s lovely in theory, but in practice, every time the government juts its nose into the affairs of private industry, Americans lose their freedom of choice. Already because of the ACA we’re seeing narrowed networks, not to mention that having health insurance has now become obligatory. We’re turning over our capacity to choose anything for ourselves.
    This flies in the face of everything the founding fathers fought for. It flies in the face of our American ideals.
    Now granted, healthcare as it is is too expensive. But this brings me to the second school of thought on overpriced healthcare, which is that hospitals and primary care practices have become financially overburdened by government regulation and complex reimbursement models which often fail to cover costs in their entirety. Hospitals then have to pick up the cost, and the result is that we end up paying more. This is not entirely a fault of government payer reimbursment models: private reimbursement models often occasionally slack on coverage. Findings of this nature have been reported by the American Hospital Association as well as the American College of Healthcare Executives (I imagine they make such information available on their websites though I’m not certain). But my belief (and I imagine most hospital executives and many phsycians would agree with this) is that medicare and medicaid reimbursement cuts present a huge strain on hospitals’ financial resources, and if we could correct that item, healthcare costs overall would start to drop.
    Personally, I believe that all individuals who work in full-time positions have a right to affordable private insurance plans, and I believe employers should be obligated to supply. I don’t believe that the Affordable Care Act has offered improvement: in fact I think things are worse. Insurance is no less expensive, and now our options have been narrowed.
    Finally, I don’t believe being able to afford health insurance is a function of luck. Yes, we probably do pay a lot more than the citizens of other industrialized countries, but at least prior to Obamacare, we could CHOOSE to pay for (or not to pay for) that expensive coverage. Now we no longer have that option, which is unfortunate for all of us.
    Most of us are not lucky: we are working very hard to be able to pay for healthcare. Let’s not insult the efforts of America’s employed by suggesting that they’ve somehow been conveniently placed in a position of privelege.

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