How Congress Stopped the Next Big Obamacare Disaster

Paul Winfree

Politics, United States

Earlier this month, the administration announced that insurers who lost money selling Obamacare would not get a $2.5 billion bailout—but it didn’t happen by chance.

Earlier this month, the administration announced that insurers who lost money selling Obamacare would not get a $2.5 billion bailout. It was great news for taxpayers, but it didn’t happen by chance.

Both chambers of Congress worked very hard to make those savings possible. And lawmakers will have to continue working hard to keep bailouts like this from happening in the future.

Here’s how Congress did it this time. But first, some background.

Obamacare used generosity to overcome insurance companies’ objections to its excessive regulation. For starters, the law mandated that everyone buy their product. It created new subsidies to help people make those purchases. And it massively expanded Medicaid, which is largely administered by insurers.

The law also created two back-end bailout programs designed specifically to benefit insurers selling Obamacare plans in the individual market. Goody No. 1 was a reinsurance program that reimburses Obamacare plans for most of the expenses run up by people with high annual claims. Funded by a tax on everyone with non-Obamacare coverage, the reinsurance program shoveled nearly $8 billion to Obamacare insurers last year.

The second bailout provision was a “risk corridor” program designed to collect payments from insurers who made excess profits–as determined by the federal government–and make payments to insurers with excess losses. If the government didn’t collect enough from profitable insurers to cover the compensatory payments, taxpayers would be stuck with covering the “shortfall.”