SVG
Commentary
Weekly Standard Online

Ending Obamacare's Insurer Bailout Is Paying Dividends

One of the least-reported substantial policy victories in recent years was stopping Obamacare’s insurer bailout through last fall’s CRomnibus bill. Now we can attach a price-tag to that victory: $2.5 billion That’s how much taxpayers would have been funneling to President Obama’s insurance-company allies if the bailout hadn’t been thwarted, according to Obama administration officials. Insurers were hoping for $2.87 billion but, thanks to the anti-bailout legislation, which required Obamacare’s risk-corridor program to operate in a revenue-neutral manner, rather than as a bailout, they will be getting only $362 million—the same amount that other insurers paid in.

But this victory was worth more than just that, for when companies can’t rely on having large chunks of their losses covered by taxpayers, they have to price their products accordingly. Thus, insurers have had to price their Obamacare-compliant policies more honestly, causing premiums to rise and enrollment to slow. All of this has been good for the cause of beating back Obama’s 2,400-page government-takeover of American health care, the repeal and replacement of which should be the primary domestic-policy focus of the 2016 Republican field.

Here’s the quick story of how this important victory over the bailout was achieved. In late 2013, Sen. Marco Rubio drew attention to the bailout in a Wall Street Journal op-ed, thereby putting the issue in play. Shortly thereafter, in early 2014, the Congressional Budget Office claimed that the bailout, or risk-corridor program (to use its official name), would somehow net taxpayers $8 billion—the CBO’s apparent assumption being that Obamacare would be such a thriving success that profitable insurers would pay into the risk-corridor fund en masse, while there would be few unprofitable insurers to pull money out of it. (The risk-corridor program was designed to limit risk as Obamacare got up and running, by having profitable insurers share their bounty with unprofitable ones.)

The newly announced figures— of only $362 million coming in while $2.87 billion would have gone out—suggest that the CBO was off by something on the order of $10.5 billion in its prediction, as its $8 billion surplus would in fact have become a $2.5 billion shortfall if the risk-corridors had been allowed to function like the bailout that Obama wanted them to be. (The CBO’s estimate was for three years, so future shortfalls will likely show its projection to have been off by even more than $10.5 billion.)

The CBO’s ludicrous scoring scared off congressional leadership, which was also getting an earful from the insurance lobby, and the issue was more or less left for dead until the 2017 Project (which Bill Kristol and I co-founded) and Heritage Action revived it. Along the way, several stalwarts in Congress did great work in advancing the issue, especially the House Oversight Committee, the House Energy and Commerce Committee, Rep. (now-senator) Bill Cassidy (R-La.), Rep. Leonard Lance (R-N.J.), and, last but certainly not least, Sen. Mike Lee (R-Utah). Finally, late last year, conservative momentum had gotten strong enough that congressional leadership agreed to include the anti-bailout provision in the CRomnibus, which Obama signed into law.

To make sure that the bailout stays dead, Rubio has introduced legislation to eliminate the risk-corridor program altogether. Right now, the program simply has to be revenue-neutral, which would be fine except that this administration has already claimed power to pay out risk-corridor money that hasn’t been appropriated by Congress. Thus (as James Madison might say, and did, “experience has taught mankind the necessity of auxiliary precautions.”

With the insurer-bailout victory having happily been achieved, perhaps it’s time to go after a similarly egregious example at the juncture of Obamacare and cronyism—the lawless congressional carve-out that keeps Congress from having to live under Obamacare like the rest of America, which the law says it is supposed to have to do.