Budget allots $5.5B for ObamaCare program decried as a ‘bailout’

The White House’s 2015 budget proposes spending $5.5 billion next year on an ObamaCare program that Republicans have labeled a “bailout” of the insurance industry.
 
The Affordable Care Act creates a temporary pool of money, known as risk corridors, to pay insurers who enroll a higher-than-expected number of sick patients through 2016.

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ObamaCare transfers the money from lower-risk plans to higher-risk plans to keep premium prices stable in the early stages of the law.
At least some of the risk corridor payments will be funded by the insurers themselves, as the law requires companies with better-than-expected results to contribute to the pool.
 
But Republicans say the government is likely to be on the hook for some of the payments, which they say would be tantamount to a taxpayer bailout of the insurance industry.

A spokesperson for the Office of Management and Budget said the administration would operate the program in a “budget neutral manner, with payments in equaling payments out.” An appendix to the budget says the administration expects collections from the program to equal obligations.
 
“The temporary risk corridor provision in the Affordable Care Act is an important safety valve for consumers and insurers as millions of Americans transition to a new coverage in a brand new Mmarketplace,” the spokesperson said.

Conservatives have also argued the Obama administration has too much leeway to reimburse insurers.
 
A handful of Republican lawmakers have proposed bills to repeal the risk corridors. House Republicans also, at one time, considered attaching a provision aimed at preventing the “bailout” as a condition for a one-year increase in the debt limit.

Proponents of the risk corridors say they are necessary to ensure stable pricing on the exchanges in case too few healthy people sign up during the early stages of the law.

The exchanges appear to be attracting older consumers, who tend to be sicker. The Health and Human Services Department has said that 25 percent of those who had signed up for ObamaCare coverage between October and December were between the ages of 18 and 34.

That’s far below the 40-percent benchmark that experts consider optimal for the exchanges, although many predicted the young and healthy would wait until closer to the enrollment deadline to seek coverage.

Supporters also note the pool of funds would only last through 2016, and the government stands to make money if the enrollment results are better than expected.

The nonpartisan Congressional Budget Office (CBO) said earlier this month that the risk corridors program would earn the government $8 billion over the 2015 to 2017 period. The government would pay insurers $8 billion over the period but would collect $16 billion in return from companies, according to the CBO.

— This story was updated at 2 p.m.