Continued from above.............
Rubio and others in the GOP often insist that the government should not engage in crony capitalism by bailing out failing companies. However, that is not what the law is intended to do. Rather, it seeks to eliminate risk corridors — a provision to smooth out over time the intense initial utilization of health insurance by the previously uninsured — in favor of tax credits. After all, people lacking coverage for medical care will want to determine their health status, and medical providers will need to provide services to establish health baselines for future monitoring. When patients are stable, they use insurance less and are more likely to be healthier in proceeding years. Therefore, while costs may be high during the initial years of the health mandate, they should eventually fall as demand decreases.
It is impossible to talk about insurance without talking about moral hazard, the idea that people take greater risks if they are protected from the consequences of those risks. In his Web series “Health Triage,” Dr. Aaron Carroll recently argued, citing the Rand Corp.’s study on health utilization behaviors, that unhealthy people should be insulated from risks associated with accessing care because it encourages them to see the doctor more. By extension, risk corridors insulate insurers from risk associated with covering care services for those sick people. Rubio wants to remove that security.
While his actions may be controversial, the use of risk corridors is not. As the American Action Forum notes in its primer on risk corridors, “The ACA’s exchanges are not the first federal entitlement program to use risk-spreading mechanisms to protect participating health insurance issuers.” Medicare Part D, Medicaid Managed Care and Medicare Advantage programs, for example, have also benefited from government insulation of risk. Such practices acknowledge the inherent risk of providing a new service and the uncertainty that it brings.
The potential fallout from Rubio’s maneuver is significant. While the provision had the initial impact of preventing highly affected insurers from gaining federal relief (with funds collected from high-performing insurers), the program is now under threat. The latest $1.1 trillion omnibus spending bill, passed by the House of Representatives last week, contains legislation that would eliminate the program. Instead, Republicans in Congress are offering $12 billion in tax breaks to health insurance companies as a means of helping offset the costs that would then be incorporated into future premiums. The risk is that the economic relief will be spread across the entire insurer market, while the former program targeted those that were affected most. Furthermore, such a change carries a $10 billion increase in federal spending compared with the previous program, funded by future losses in tax revenue, whereas the original program was self-funded.
Smaller insurers that would contribute greater competition to the insurer market are leaving the exchanges, are decreasing their involvement or have folded. People with policies from these organizations are experiencing disruption in their coverage. The long-term stability and effectiveness of the ACA have been compromised because of a twisted variation of the populist rhetoric against companies considered too big to fail. The government had targeted mechanisms in place to help, but one presidential hopeful decided to play politics instead.