December 8, 2015

Continue to Protect Taxpayers from Obamacare Bailout


  • Congress has the ability to end Obamacare’s bailout of insurance companies.

  • In the 2014 “Cromnibus,” Congress required Obamacare’s risk corridor provision to be budget neutral – meaning taxpayer dollars could not be used to cover insurers’ excess losses.

  • Congress should continue to protect taxpayer dollars from being used to bail out Obamacare.


Risk corridors are an insurance company bailout

Obamacare helped insurance companies in many ways:

  • Mandated that people purchase Washington-designed insurance or pay a tax penalty
  • Mandated that employers offer insurance
  • Authorized large subsidies to be paid directly to insurance companies for people to purchase this insurance
  • Took money away from people with group coverage through a “reinsurance” program
  • Delivered that money to insurers offering Obamacare-compliant products to pay for the costs of their high-expense enrollees

In total, insurers got $26 billion in direct subsidies in 2014.

Despite this massive subsidy, insurers still lost money selling Obamacare insurance in 2014. The administration is now trying to use taxpayer funds to bail out these insurers. Section 1342 of Obamacare created a risk corridor program designed to transfer money from insurers that earned “excess” profits on Obamacare plans to insurers that incurred excess losses on these plans. If total excess losses exceed total excess profits, Obamacare puts taxpayers on the hook to cover the shortfall.

obamacare-risk-corridors-web

Last December, Congress blocked taxpayer funds from being used to make up any risk corridor program deficit in fiscal year 2015. Senator Rubio sent a letter late last month to House and Senate leaders requesting that Congress maintain this risk corridor treatment for 2016.

“[T]axpayers should never be required to bail out health insurance companies that lose money under ObamaCare. For this reason, Congress should repeal the risk corridors provision of ObamaCare as part of the Omnibus Appropriations bill the Senate is expected to consider next month.” Senator Rubio, November 24, 2015

Taxpayers already are being forced to pay for Obamacare’s unwise Medicaid expansion and its problematic subsidies. Allowing an Obamacare bailout of insurers through the risk corridors would pass even more costs of this failed law on to hard working Americans.

Obamacare not living up to promises

Obamacare’s insurance exchanges have attracted a disproportionate number of unhealthy people. This adverse risk pool has driven up costs for consumers, contributing to Obamacare’s large premium and deductible increases. As premiums and deductibles continue to rise, fewer and fewer healthy Americans will enroll in health coverage, which will drive costs even higher. Even though insurers are charging consumers more to make up for the risk in their new pool of customers – and even with the individual mandate forcing more Americans into overpriced plans – insurers are struggling under Obamacare.

In November, the country’s largest insurer, UnitedHealth Group, announced it has experienced huge losses selling plans on Obamacare’s exchanges and may have to pull out of them. Wellmark of Iowa said that its “ACA members are using substantially more services and are receiving care for more chronic and critical diseases than anticipated.” More than half of Obamacare’s health insurance co-ops have been forced to shut down due to large losses. One analyst estimates that insurers lost at least 12 percent of premiums on Obamacare-compliant plans in 2014 even after receiving $8 billion through the reinsurance program. A recent analysis from Standard & Poor’s shows that insurers are likely to incur significant losses in 2015 as well.

If Congress allows Obamacare’s exchanges to be propped up with taxpayer funds, it would mask the true harm Obamacare causes to consumers and the failures of the law. The omnibus spending bill is an opportunity for Congress to protect taxpayer dollars.

Issue Tag: Health Care