NCPA - National Center for Policy Analysis

Will Congress Refuse to Fund the Risk Corridors?

November 13, 2014

The new Republican controlled Congress may refuse to fund the "risk corridors" program in the Affordable Care Act, which subsidizes unsuccessful insurance companies, writes Eric Boehm of the Pennsylvania Independent.

The risk corridors program allows a redistribution of profits from successful insurance companies to those that post losses.  However, a recent report from the Government Accountability Office notes that Congress would have to appropriate funds for the program in its 2015 budget. According to NCPA Senior Fellow John R. Graham, the new Republican majority could protect taxpayers by failing to fund the program: "The law requires appropriations for risk-corridor payments. As a result of the election, Republican majorities in both chambers can ensure that no further appropriations are made for risk corridors."

If the law merely requires redistribution of profits from profitable to unprofitable insurance companies, how are taxpayers affected? According to Boehm, there may not be enough in the way of "excessive" profits to pay the companies that lose money, and nothing in the law requires the program to be self-funding, despite claims from the Obama administration that it would be. If more insurers than expected are unprofitable, taxpayers could be on the hook for the losses. As Graham wrote in a recent NCPA study, risk corridors are "unlimited taxpayer obligations to compensate insurers in the exchanges" for excessive medical costs. 

Congress could choose not to fund the risk corridors program, or it could repeal the program outright, explains Boehm, noting that there is already legislation in the House that would do away with it.

Source: Eric Boehm, "Congress Must Approve Insurance Company Bailouts,", November 10, 2014.


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