{"id":2037,"date":"2014-02-06T15:47:31","date_gmt":"2014-02-06T20:47:31","guid":{"rendered":"http:\/\/www.dougsbriefcase.com\/blog\/?p=2037"},"modified":"2014-02-07T07:31:15","modified_gmt":"2014-02-07T12:31:15","slug":"obamacare-taxpayers-take-risk-subsidies","status":"publish","type":"post","link":"https:\/\/www.dougsbriefcase.com\/blog\/obamacare-taxpayers-take-risk-subsidies\/","title":{"rendered":"Obamacare: Should Taxpayers Take the Risk of Subsidies?"},"content":{"rendered":"
\"I<\/a>

I tes\u00adti\u00adfied on Oba\u00admacare yes\u00adter\u00adday before the House Over\u00adsight and Gov\u00adern\u00adment Reform Committee.<\/p><\/div>\n

I tes\u00adti\u00adfied yes\u00adter\u00adday before the House Over\u00adsight and Gov\u00adern\u00adment Reform Com\u00admit\u00adtee on a some\u00adwhat tech\u00adni\u00adcal pro\u00advi\u00adsion of Oba\u00admacare.  The pro\u00advi\u00adsion estab\u00adlish\u00ades \u201crisk cor\u00adri\u00addors,\u201d which lim\u00adit prof\u00adits and loss\u00ades of insur\u00aders that sell through the exchanges.  Plans that make \u201cexcess prof\u00adits\u201d must pay into the risk cor\u00adri\u00addor fund; those that suf\u00adfer \u201cexcess loss\u00ades\u201d receive mon\u00adey from that fund. <\/em><\/p>\n

The\u00ado\u00adret\u00adi\u00adcal\u00adly, the gov\u00adern\u00adment would nev\u00ader pay more mon\u00adey out of the fund than was paid in.  But HHS<\/span> announced last year that dis\u00adburse\u00adments from the funds could exceed receipts, mean\u00ading that they can use tax\u00adpay\u00ader mon\u00adey to make pay\u00adments to insur\u00adance companies.<\/em><\/p>\n

The issue grew con\u00adtentious in recent weeks, espe\u00adcial\u00adly once House lead\u00aders sug\u00adgest\u00aded that they might attach leg\u00adis\u00adla\u00adtion repeal\u00ading risk cor\u00adri\u00addors to a bill rais\u00ading the gov\u00adern\u00admen\u00adt\u2019s bor\u00adrow\u00ading author\u00adi\u00adty.  They dropped that idea yes\u00adter\u00adday and it like\u00adly won\u2019t sur\u00adface again. <\/em><\/p>\n

The morn\u00ading before I tes\u00adti\u00adfied, the Con\u00adgres\u00adsion\u00adal Bud\u00adget Office (CBO<\/span>) released its new bud\u00adget analy\u00adsis, which includ\u00aded its esti\u00admate that the \u201crisk cor\u00adri\u00addor\u201d pro\u00advi\u00adsion would save the gov\u00adern\u00adment mon\u00adey.  I\u2019m per\u00adson\u00adal\u00adly rather skep\u00adti\u00adcal of this esti\u00admate and, in any event, it does not pre\u00advent HHS<\/span> from spend\u00ading more than the risk cor\u00adri\u00addor fund takes in, should the esti\u00admate prove wrong.<\/em><\/p>\n

In my tes\u00adti\u00admo\u00adny, I called on Con\u00adgress to amend the law to ensure that risk cor\u00adri\u00addors don\u2019t cost the gov\u00adern\u00adment mon\u00adey by requir\u00ading that they be at least bud\u00adget neu\u00adtral.  You can read my com\u00adplete state\u00adment here<\/a>.  My open\u00ading state\u00adment to the com\u00admit\u00adtee is below.<\/em><\/p>\n

Chair\u00adman Issa, Rank\u00ading Mem\u00adber Cum\u00admings and dis\u00adtin\u00adguished Mem\u00adbers of the Committee:<\/p>\n

Thank you for invit\u00ading me to appear today to dis\u00adcuss pro\u00advi\u00adsions of the health care law that have been char\u00adac\u00adter\u00adized as \u201cinsur\u00adance com\u00adpa\u00adny bailouts.\u201d<\/p>\n

Peo\u00adple gen\u00ader\u00adal\u00adly under\u00adstand that the health care law includes sub\u00adsi\u00addies for indi\u00advid\u00adu\u00adals who buy insur\u00adance. It should not pro\u00advide sub\u00adsi\u00addies to cor\u00adpo\u00adra\u00adtions that sell it.<\/p>\n

It has been argued that insur\u00aders can\u2019t make a prof\u00adit with\u00adout such sub\u00adsi\u00addies. CBO<\/span>\u2019s most recent esti\u00admate on risk cor\u00adri\u00addors sug\u00adgests that, in the aggre\u00adgate, issuers in the exchanges will real\u00adize pre\u00admi\u00adum rev\u00adenue that sub\u00adstan\u00adtial\u00adly exceeds their pro\u00adject\u00aded costs. Their expect\u00aded prof\u00aditabil\u00adi\u00adty is attrib\u00adut\u00adable in part to pow\u00ader\u00adful tools con\u00adtained in the law. These pro\u00advi\u00adsions help com\u00adpa\u00adnies that sell through the exchanges pros\u00adper with\u00adout the need for var\u00adi\u00adous cor\u00adpo\u00adrate wel\u00adfare provisions.<\/p>\n

The law has hand\u00aded such insur\u00aders enor\u00admous oppor\u00adtu\u00adni\u00adties to increase their rev\u00adenues and attract more cus\u00adtomers, espe\u00adcial\u00adly healthy ones. It sub\u00adsi\u00addizes the cost of their prod\u00aduct. It penal\u00adizes peo\u00adple who don\u2019t buy their prod\u00aduct. Reg\u00adu\u00adla\u00adtors have required the can\u00adce\u00adla\u00adtion of \u201cnon-grand\u00adfa\u00adthered\u201d indi\u00advid\u00adual and small group poli\u00adcies and will can\u00adcel many more lat\u00ader this year, leav\u00ading these peo\u00adple with lit\u00adtle choice but to obtain insur\u00adance through an exchange. It is an enor\u00admous gov\u00adern\u00adment effort that involves dri\u00adving busi\u00adness to that seg\u00adment of health insur\u00aders that sell through the exchanges.<\/p>\n

Col\u00adlec\u00adtive\u00adly, these pro\u00advi\u00adsions should be suf\u00adfi\u00adcient to induce mil\u00adlions of healthy peo\u00adple into plans sold through the exchanges with\u00adout the need for addi\u00adtion\u00adal gov\u00adern\u00adment intervention.<\/p>\n

The law\u2019s \u201cpre\u00admi\u00adum sta\u00adbi\u00adliza\u00adtion\u201d pro\u00advi\u00adsions raise con\u00adcerns because they cre\u00adate the poten\u00adtial for back\u00addoor assis\u00adtance from tax\u00adpay\u00aders to insur\u00adance com\u00adpa\u00adnies and the moral haz\u00adard that entails.<\/p>\n

The law\u2019s risk cor\u00adri\u00addors are among these pro\u00advi\u00adsions. CMS<\/span>\u2019s deci\u00adsion to per\u00admit risk cor\u00adri\u00addor dis\u00adburse\u00adments in excess of receipts is espe\u00adcial\u00adly trou\u00adbling. It cre\u00adates the pos\u00adsi\u00adbil\u00adi\u00adty that gov\u00adern\u00adment will use pub\u00adlic mon\u00adey to mit\u00adi\u00adgate loss\u00ades incurred by insur\u00aders who improp\u00ader\u00adly price their products.<\/p>\n

CBO<\/span>\u2019s esti\u00admate that risk cor\u00adri\u00addors will save the gov\u00adern\u00adment $8 bil\u00adlion over 3 years offers some comfort.<\/p>\n

But CBO<\/span>, as we all know, is often wrong and its new esti\u00admate is accom\u00adpa\u00adnied by the usu\u00adal recita\u00adtion of caveats. There sim\u00adply is too much uncer\u00adtain\u00adty sur\u00adround\u00ading the law\u2019s imple\u00admen\u00adta\u00adtion for Con\u00adgress to rely exclu\u00adsive\u00adly on this lat\u00adest CBO<\/span> esti\u00admate, which is sub\u00adject to change with\u00adout notice.<\/p>\n

Instead, it should amend the Act either to repeal risk cor\u00adri\u00addors or, in the alter\u00adna\u00adtive, to stip\u00adu\u00adlate that aggre\u00adgate risk cor\u00adri\u00addor dis\u00adburse\u00adments can\u00adnot exceed receipts. If CBO<\/span> is cor\u00adrect, then the gov\u00adern\u00adment will still get its $8 bil\u00adlion in deficit reduc\u00adtion. If it is wrong, tax\u00adpay\u00aders would be pro\u00adtect\u00aded against unex\u00adpect\u00aded spending.<\/p>\n

Some might argue against even a small but pru\u00addent step like a bud\u00adget neu\u00adtral\u00adi\u00adty require\u00adment because insur\u00aders weren\u2019t expect\u00ading one when they estab\u00adlished their 2014 pre\u00admi\u00adums last spring. That is not a line of argu\u00adment that the gov\u00adern\u00adment has found ter\u00adri\u00adbly per\u00adsua\u00adsive when applied to indi\u00advid\u00adu\u00adals and small firms.<\/p>\n

Mil\u00adlions of indi\u00advid\u00adu\u00adals and small busi\u00adness own\u00aders expect\u00aded to renew their cov\u00ader\u00adage; they didn\u2019t expect to have it can\u00adceled, but that didn\u2019t stop the gov\u00adern\u00adment from order\u00ading the cancelations.<\/p>\n

More can\u00adce\u00adla\u00adtion notices will come lat\u00ader this year, accord\u00ading to CBO<\/span>; los\u00ading their cov\u00ader\u00adage isn\u2019t what those peo\u00adple chose, but it is their fate.<\/p>\n

My moth\u00ader-in-law expect\u00aded to con\u00adtin\u00adue to receive care from the area\u2019s largest health sys\u00adtem; she didn\u2019t expect her Medicare Advan\u00adtage plan to drop the sys\u00adtem from its net\u00adwork, but that is one con\u00adse\u00adquence of Medicare cuts in the health care law.<\/p>\n

Mil\u00adlions of Amer\u00adi\u00adcans have been asked to adjust, adapt and evolve, to endure adverse con\u00adse\u00adquences with\u00adout com\u00adplaint and with\u00adout relief. They are deal\u00ading with the unex\u00adpect\u00aded. Con\u00adgress should ask no less of insur\u00adance companies.<\/p>\n

Insur\u00aders should be able to make a prof\u00adit in gov\u00adern\u00adment mar\u00adket\u00adplaces even if Con\u00adgress repeals risk cor\u00adri\u00addors or pro\u00adhibits expen\u00addi\u00adtures to exceed receipts. The law\u2019s com\u00adbi\u00adna\u00adtion of man\u00addates, sub\u00adsi\u00addies, can\u00adce\u00adla\u00adtions and tax penal\u00adties can be expect\u00aded to induce or com\u00adpel mil\u00adlions of peo\u00adple in rel\u00ada\u00adtive\u00adly good health to buy their product.<\/p>\n

Indi\u00advid\u00adual com\u00adpeti\u00adtors will suf\u00adfer loss\u00ades if their costs exceed their rev\u00adenues. That is not the tax\u00adpay\u00aders\u2019 problem.<\/p>\n

The gov\u00adern\u00adment has estab\u00adlished its mar\u00adket\u00adplaces. Let the insur\u00aders compete.<\/p>\n","protected":false},"excerpt":{"rendered":"

I tes\u00adti\u00adfied yes\u00adter\u00adday before the House Over\u00adsight and Gov\u00adern\u00adment Reform Com\u00admit\u00adtee on a some\u00adwhat tech\u00adni\u00adcal pro\u00advi\u00adsion of Oba\u00admacare.  The pro\u00advi\u00adsion estab\u00adlish\u00ades \u201crisk cor\u00adri\u00addors,\u201d which lim\u00adit prof\u00adits and loss\u00ades of insur\u00aders that sell through the exchanges.  Plans that make \u201cexcess prof\u00adits\u201d \u2026 Con\u00adtin\u00adue read\u00ading \u2192<\/span><\/a><\/p>\n","protected":false},"author":3,"featured_media":2040,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","wp_typography_post_enhancements_disabled":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"nfd_image_url":"","nfd_onboarding_generated":"","footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[16,124,1],"tags":[31,51,844,119,623,122,1188,714],"class_list":["post-2037","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-health-care","category-obamacare","category-uncategorized","tag-cbo","tag-cms","tag-darrel-issa","tag-health-insurance","tag-health-insurance-exchanges","tag-hhs","tag-obamacare","tag-risk-corridors"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t