When I first heard about the $2.5 billion risk corridor shortfall in 2014 I was both happy and dismayed. I was happy because I did not believe the Congressional Budget Office estimate that the risk corridors would make the government $8 billion. It just did not make sense that the insurance companies would have excess profits from insuring enrollees who were generally older and sicker than anticipated. I was dismayed that the insurance companies would be confronted with two choices:
- Raise insurance rates for policies issued through the exchanges
- Get the middle class to pay for a bailout
Today I read an article, How Congress Stopped a Massive Obamacare Bailout, which said that Congress had looked at the “risk corridor” appropriation problem and decided last year that the risk corridor program would be budget-neutral for fiscal year 2015. Since Congress has already opted for the budget-neutral approach that makes it almost impossible to switch to a “risk corridor” appropriation method in an election year without it looking like a bailout. That leaves insurance companies with only one alternative. They will have to raise rates to recoup their losses. Since 87% of the people in the exchanges have subsidized insurance, their cost is unchanged. It is the government and that 13% of the people who do not get subsidized insurance who will be hurt from the higher insurance rates. This is the first step of the death spiral. Maybe this is the reality check the insurance companies needed to get on board with either repealing or replacing the Affordable Care Act. It should be obvious to the insurance companies that the current system is not working and they were duped!