Some House Republicans on Wednesday set out to make Obamacare look bad. They ended up making it look good.
It happened at a hearing of the Oversight Committee. The subject was the Affordable Care Act’s “shock absorbers”—programs called risk corridors, reinsurance, and risk adjustment through which insurance companies can collect government subsidies if they lose large sums of money. The idea of these programs is to protect insurers, in case too many sick people (or too few healthy people) sign up for coverage. Medicare Part D has similar protections in place. So do some universal health care systems abroad.
The Congressional Budget Office has estimated that the most controversial of these, the “risk corridors,” will end up paying for itself—since insurers who get better-than-expected enrollment pay into the system, even as insurers who get worse-than-expected enrollment take money out of it. But Obamacare critics have insisted that the law won’t get a good mix of people into insurance—that older and sicker people will sign up in disproportionate numbers. That would force the government to pay out more money, creating what these critics say would be an insurance company “bailout.” It’d also be a sign that the program, as whole, isn’t working as well as intended.
On Wednesday, House Republicans claimed to have new data vindicating their claims. It was a survey of insurance carriers who, together, cover about three-fourths of the people who have signed up for policies through one of the new insurance marketplaces. According to the survey, officials at most of the companies expected to take money out of the risk corridor program, while not a single one expected to pay into it. If the survey is an accurate portrayal of reality—it's hard to know with this sort of testimony—that would sound pretty discouraging.
But is it really? In an opening statement, Congressman Jim Jordan, who was presiding at the hearing, said that total risk corridor payouts would be about $730 million, based on the survey results. Throw in the insurers that didn’t respond to the survey, Jordan noted, and you get close to $1 billion this year. Yes, cue Austin Powers. In the context of a program with outlays and tax credits of more than $2 trillion over the next ten years, that extra spending is simply not a big deal. (Remember, the risk corridor program expires in 2016.) That's particularly true when you consider that insurance premiums on the new marketplaces are lower than the CBO predicted, which means the government may be realizing savings that are larger by comparison, since it doesn't have to write such big subsidy checks.
Meanwhile, it turns out that the insurers provided some other information. The House Republicans didn’t talk about it, but Democrats on the committee did. The additional data was about enrollment by age—what the insurers expected to get, and what they actually got. It turns out that enrollment among 18-to-34 year olds actually exceeded expectations, both in absolute and relative terms.
That doesn't mean the insurance risk pool is better than expected. It’s entirely possible, for example, that insurers got more young people than expected—but fewer healthy people. From an actuarial point of view, health status matters more than age. But if insurers thought they were in real trouble, they'd be expecting much larger risk corridor payments. They don't seem to be. That suggests enrollment patterns for the Affordable Care Act are pretty close to what everybody expected.
The hearing itself didn’t attract a lot of attention. At the outset, I’m told, Democrats outnumbered Republicans. Maybe that’s because, like so many other attacks on Obamacare, this one is fizzling fast.
Note: This item has been updated to add some more context, about premium levels and the uncertainty about the survey itself.