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Oops: GOP's Obamacare 'Bailout' Fix Would Increase The Deficit

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AP Photo / J. Scott Applewhite

In a new report Tuesday, the nonpartisan Congressional Budget Office found that the risk corridors program would save the federal government $8 billion. That means scrapping the program would add $8 billion to the deficit.

"CBO now projects that, over the 2015–2024 period, risk corridor payments from the federal government to health insurers will total $8 billion and the corresponding collections from insurers will amount to $16 billion, yielding net savings for the federal government of $8 billion," the budget office concluded.

It's a significant blow to legislation introduced by Sen. Marco Rubio (R-FL), the leader of the anti-"bailout" effort, and numerous companion bills offered by House Republicans. It also weakens the position of House GOP leaders as they consider attaching repeal of the risk corridors program to an upcoming debt limit increase ahead of a late February deadline.

Alex Conant, a spokesman for Rubio, pointed out that the CBO report said its Obamacare projections were "partial and preliminary" and didn't have all the most recent enrollment data. "By HHS' own regulation, risk corridor payments are meant to be based on real and actual claims data, due July 31st, 2014," Conant said in an email.

For now, though, bills to repeal the risk corridors will be scored as deficit raisers.

"This is a serious and embarrassing setback for Republicans trying to tie repealing this provision to the debt limit," said a senior Democratic Senate aide.

The risk corridors are a stability mechanism that apply to individual and small-group policies issued on the Obamacare exchanges for the first three years. They collect money from insurers with plans that have profits of more than 3 percent and pay insurers with losses of more than 3 percent, after accounting for risk adjustment and reinsurance payments and collections. The idea is to spread risk in case some insurers end up with sicker customers. The program sunsets in 2016.

The program -- a version of which was also included in Medicare Part D -- was originally projected to be deficit-neutral. The GOP effort was sparked by a mix of anti-Obamacare politics and their belief that the law's botched rollout last October might leave the exchanges with a sicker pool of customers and put taxpayers on the hook for a "bailout" of insurance companies.

A top insurance industry source called on Republicans to leave the risk corridors alone.

"CBO basically says its not a bailout, completely undercutting their message, and GOP will now need to find $8 billion in pay fors to repeal it. Don't see the path forward," said the source, who spoke on condition of anonymity. "There was already debate within party on whether to focus on this issue. I think this effectively ends that."

This article has been updated.

About The Author

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Sahil Kapur is TPM's senior congressional reporter and Supreme Court correspondent. His articles have been published in the Huffington Post, The Guardian and The New Republic. Email him at sahil@talkingpointsmemo.com and follow him on Twitter at @sahilkapur.