HEALTH CARE/Joan Retsinas

The Insurance Companies are in Bed with Uncle Sam

The latest outrage of conservative solons: insurance risk corridors. The “corridors” are a euphemism for price-protection, or, a more loaded term, a “bailout” – one more Affordable Care Act codicil that raises conservatives’ hackles. Briefly, with the brand new Affordable Care Act, insurers have set premiums based on what they assume is a valid calculation of costs. But if an inordinate number of sick enrollees sign up, the insurer will lose money. If that happens, Uncle Sam will step in, to mitigate those losses, thereby guaranteeing not just the insurers’ solvency, but their participation in the Affordable Care Act. The law stipulates that if an insurer’s costs exceed premiums by up to 8%, Uncle Sam will pay 50% of the loss. If costs exceed 8%, Uncle Sam will ante up for 80%. The corridors, though, are two-way: if insurers’ profits soar too high, Uncle Sam will claim some of the windfall. Both sides have put themselves at risk; the corridors let both parties — taxpayers and investors — share the risk. Indeed, without some protection built into the contract, many insurers would not participate. And without some protection for taxpayers, it is not clear that this Act would have passed.

In conservatives’ eyes, the pragmatic arrangement looms as treachery. From their vantage, Uncle Sam has bedded down with Big Insurance; it is a bit like finding Mom cavorting with the mailman. Government is not just meddling with the private sector megaliths, but entwined with them. Captain Renaud, who regulated gambling in Casblanca, would understand the reality: pragmatism trumps the law. Or, in the case of insurance risk corridors, common sense trumps ideology. Congressional conservatives, however, are screaming to axe this provision from the Affordable Care Act – knowing that the corridors represent a crucial linchpin. Indeed, they are screaming to axe this partnership precisely to undermine the entire Act.

Ironically, the risk-sharing partnership between insurers and Uncle Sam did not start with President Obama. In 2006 President Bush – a pragmatic Republican, a designation that today seems an oxymoron – built it into Medicare Part D, the insurance program that covers prescription drugs. That Republican administration recognized risk corridors as one way to jump-start Medicare Part D. At the time liberals objected to the law: it included too many insurers, let insurers set prices, let insurers determine the drugs to include. And first-time enrollees objected to the confusing mishmash of choices, as well as to the “doughnut” hole of cost-sharing. But nobody, certainly not Republicans, objected to the risk corridors. The corridors received scant attention. After all, the corridors protected both insurers and taxpayers (as well as got insurers to participate). At the start of Medicare Part D, the actuaries could not definitively predict costs, could not reasonably guarantee that premiums would cover costs. The corridors were a pragmatic tactic. In 2016 that provision for risk corridors in Medicare Part D is set to expire.

Today’s outraged conservatives are blatantly hypocritical: they are blasting a provision they themselves inserted into Medicare Part D eight years ago. They are also cruel. In the name of a Fountainhead-inspired loathing of government, they would doom millions of Americans to lives without health care. If we want to insure most Americans, we have two choices: a government-operated system, like Medicare, or a partnership of private insurance and government. Congress firmly rejected the former choice – a one-payer Medicare-for-all option that many liberals urged. Instead, Congress opted, reluctantly, for the second choice – a private-public tryst.

Captain Renaud understood that Casablanca depended on gambling. So too millions of Americans need this tryst. If only this batch of conservative solons would remember Captain Renaud.

Joan Retsinas is a sociologist who writes about health care in Providence, R.I. Email retsinas@verizon.net.

From The Progressive Populist, April 1, 2014