Risk Corridors: Bail-Out or Insurance for the Insurance Companies?
Risk Corridors: Bail-Out or Insurance for the Insurance Companies?

Another aspect of the Affordable Care Act is getting some new attention lately – risk corridors. Risk corridors are essentially an insurance policy for health insurance companies to protect them from significant losses in any given year.

When insurance companies price their premiums, they base it on a number of assumptions about the mix and number of people that will enroll in their plans in any given year. Risk corridors help protect insurance companies from large losses in the event that enrollment doesn’t pan out to meet these expectations. They are only in place for the first three years of ACA implementation in light of the significant changes taking place.

Republicans in Congress have mounted a new effort to repeal the risk corridors, dubbing them a “blank check for a bailout of the insurance companies.” Ultimately, however, the risk corridors are designed to keep the market stable – both in terms of premiums and insurer participation. So, while they could be perceived as a “bail-out” for the insurance companies, they’re designed to preserve access and protect consumers. Interestingly, in its recent Budget Outlook, the Congressional Budget Office actually estimated that the risk corridors could generate as much as $8 billion in taxpayer savings over the long-term.

Of course, risk corridors aren’t a new concept. They were employed for the same reasons for Medicare Part D Prescription Drug Plans – a law spearheaded by Republicans and signed by President Bush.

Even though millions of Americans are now covered by Marketplace plans, it appears that the ACA isn’t likely to cease being a source of conflict and debate anytime soon.