Rubio to introduce bill that would repeal “risk corridor” — a.k.a. bailout — provisions of ObamaCare
...Via the Weekly Standard, here’s David Cutler, one of the architects of O-Care, admitting last night that an insurance industry death spiral isn’t out of the question here. In fact, though, the “risk corridor” is designed to reduce the risk of a death spiral; so are the taxpayer subsidies for lower-income enrollees on the exchanges, which can (at least theoretically) be increased to keep pace with premiums if/when they start to rise. Without the risk corridor and the subsidies, the only way for insurers to make back their losses this year is to jack up premiums next year, which will further discourage healthy people from enrolling, which in turn will make the exchange risk pools even sicker and more costly, and thus the death spiral is set in motion. Thanks to Uncle Sam’s “generosity,” they might not have to do that. But all of this points to the same basic fact: The more adverse selection there is on the new exchanges, the more unanticipated costs there’ll be. Those costs will be borne either by the insurance industry, if Rubio’s bill prevails and the “risk corridor” provision is eliminated, or mostly by the federal government, in the form of a bailout and higher subsidies. The political challenge of Rubio’s bill for Democrats is that they don’t want to be on the wrong side of yet another TARP-like government giveaway to an unpopular industry, but on the other hand they can’t take away insurers’ “risk corridor” safety net or else the industry might turn on ObamaCare and then the whole thing will implode. Dilemmas, dilemmas....