Sometimes it’s hard to generate enough public attention to move good policy forward. There are plenty of examples of needed reforms that do not happen because they do not make good politics or capture public interest. However, these days the opposite is true too often. Lately, policymakers have turned away from good policy because of clever and dramatic messaging that grabbed the attention of the American people and made sound ideas suddenly seem unfair or untenable.
No surprise that the latest examples of this practice involve the Affordable Care Act, or Obamacare. In 2010, Congress and President Barack Obama seized on the public’s attention to millions of uninsured Americans: people who had lost coverage because of pre-existing conditions or aged off their parents insurance, and those who paid much more in premiums because of their gender or age. Congress passed a historic law that created an improved insurance marketplace that ensures more and better health care coverage.
The details of how the law ensured the stable transition of the marketplace are rather arcane, making it easy for clever messaging to distort the truth and difficult to counteract inaccuracies. The latest example is cries of an “insurer bailout.”
The reality is that we asked insurers to cover people with whom they had no previous experience, making it hard to know how much care these new customers might need. The actuaries worked to make educated guesses about how to price these new products, but it was our responsibility in creating a new marketplace based on private insurance to put some guardrails in place in the first few years. Otherwise, the risk to participate may have been too high, leaving consumers with few choices.
The way the temporary risk corridors work is, for the first three years of the program, health plans share in gains and losses with the government. This only happens until there is enough experience in the new marketplace to create a better understanding of how to price premiums. If an insurer makes too much money while these risk corridors are in place, it has to pay the federal government. If the insurer loses too much money, the federal government steps in and helps defray some of the losses. Another temporary risk mitigation strategy uses the insurance companies own money, not taxpayer dollars, to create a pool of funds that “reinsures” health plans for people with very high medical costs.
This is not a bailout. In fact, according to Congressional Budget Office, the American taxpayer can expect to see an $8 billion savings over time as a result of this program. This is also a temporary program that ensures a viable private market. The Affordable Care Act balanced the need for products to be offered with the uncertainty and risk of selling insurance in a completely new marketplace.
These same policies were put in place when Medicare Part D was established under President George W. Bush. Furthermore, crop insurance, flood insurance and terrorism risk coverage also have risk mitigation aspects such as reinsurance. This is how we ensure a stable market. If you eliminate these provisions, it will result in premium increases and market destabilization.