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Health law "insurance industry bailout" actually saves taxpayers money

Kaiser Health News story

The GOP claims that the health law burdens taxpayers with an insurance industry bailout. A report suggests otherwise.

New findings from the Congressional Budget Office may make it harder for Republicans to portray a provision in the health law designed to limit insurers’ losses and gains as a bailout for the industry.

The House Oversight and Government Reform panel is scheduled to have a hearing Wednesday examining the law’s “risk corridors,” which limit plans’ exposure to possible upheavals caused by the transition to marketplaces that require health insurers to accept all comers, no matter how poor their health.  Witnesses include Sen. Marco Rubio, R-Fla., who is sponsoring legislation to repeal the risk corridors, which he and the bill’s co-sponsors have called a “blank check for a bailout of insurance companies.”

Under the program, actual claims are compared to the claims insurers anticipated when they set their premiums.  The government collects money from plans with lower-than-expected claims to make payments to plans with higher-than-expected claims.  If claims exceed expected amounts,  the government makes up some of the difference.

The CBO’s budget outlook, released Tuesday, projected that the risk corridor program will actually produce $8 billion over its lifespan rather than cost taxpayers money.  Previously the nonpartisan agency had not counted the program as a cost or benefit to the government because it assumed that payments from insurers would offset payments made to other insurers.Read more. 

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