U.S. Senator Urges Budget Neutrality on Obamacare Risk Provisions

Marco Rubio
Marco Rubio / AP
April 2, 2014

By David Morgan

WASHINGTON (Reuters) - U.S. Sen. Marco Rubio, a prominent Republican critic of President Barack Obama's healthcare law, unveiled legislation on Tuesday to make sure Obamacare would not add to the deficit by compensating insurance companies for possible losses.

The 2010 healthcare law includes provisions to safeguard insurers against losses if they saw unexpectedly high enrollments of sick or older people, who are costlier to insure than young, healthy consumers.

The Florida senator has labeled the provisions a "bailout" for insurance companies.

Rubio's two-page bill, dubbed "the ObamaCare Taxpayer Bailout Protection Act," requires the administration to ensure that the law's risk provisions "reduce to zero the cost ... to the federal government."

"The White House has said ... it will have to be budget neutral, that no money from taxpayers or general revenue will be spent in bailing out the exchanges. And all I'm offering now is a bill that will say: 'Let's codify what you've already agreed to do,'" Rubio said at the Reuters Health Summit in Washington.

Rubio, seen as a possible White House contender for 2016, proposed repealing the little-known risk-corridor provisions in legislation he introduced last year.

Insurers oppose repeal of the provisions, saying they were put in place to protect the companies against marketplace uncertainties during the first few years of Obamacare's rollout.

The nonpartisan Congressional Budget Office predicted the provisions would create a net gain of $8 billion for the budget over the program's three-year life. That is because some companies that have lower-than-expected costs would be required to share their windfall with the federal government.

Cigna Corp Chief Executive David Cordani told the Reuters Health Summit he agreed with the idea that the markets needed to be self-sustaining without artificial financial supports. But he said risk corridors were designed to be market neutral and priced into the products that Cigna and other insurers are already offering on the Obamacare marketplaces this year.

"It's a fundamental part of the design of the law," Cordani said. He said Cigna would not favor risk mitigation programs that add to tax-funded subsidies.

But others said it was not clear how useful risk mitigation would prove to be for insurers.

"They're super-complicated. Very few people understand exactly how they work. They've never been tried on this scale before," Chet Burrell, chief executive of CareFirst BlueCross BlueShield, told the Reuters Health Summit. "How's it all going to come out? I don't think anybody on earth can say."

(Reporting by David Morgan; Editing by Caren Bohan and Peter Cooney)