White House: Federal government won’t be bailing out insurers

The risk corridors created under ObamaCare that Republicans have decried as a “bailout” won’t cost the federal government anything because they’ll be implemented in a “budget neutral fashion,” the Obama administration said Wednesday.

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. On Wednesday, the administration said it would only be making payments under the program if matching cash flows are coming in.

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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. ObamaCare transfers the money from lower-risk plans to higher-risk plans to keep premium prices stable in the early stages of the law.

But Republicans say the government is likely to remain on the hook for some of the payments, which they say would be tantamount to a taxpayer bailout of the insurance industry. Sen. Marco Rubio (R-Fla.), who has proposed legislation to repeal the risk corridors, said the administration’s announcement would do nothing to prevent a bailout.

“Taxpayers should not have to bail out health insurance companies because of ObamaCare’s failures,” he said in a statement. “The Obama Administration all but acknowledged today that ObamaCare’s risk corridors are open-ended and needlessly expose taxpayers to bailing out health insurance companies. Given the Obama Administration’s track record of bending, breaking and rewriting ObamaCare, they should make this move permanent through the legislative process.”

The White House’s 2015 budget proposes spending $5.5 billion next year on the risk corridors.


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

Wednesday’s announcement came on a conference call with reporters in which the administration announced a new ObamaCare delay that will allow some consumers to keep health plans that do not meet the law's standards until past the end of the Obama presidency.


The administration also announced on Wednesday that open enrollment would not be extended beyond March 31 for 2014.

In 2015, however, open enrollment has been delayed by a month, and extended by a month, to last from Nov. 15, 2014-Feb. 15, 2015. Previously, the enrollment period only stretched from October to January. This will mean that consumers won't see the marketplace premiums until after the election, another move that could benefit Democrats.

The Treasury Department also announced it was streamlining and reducing its reporting requirements for businesses in an attempt to make it easier for employers to provide coverage for their employees.