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Yes, Marco Rubio Led The Effort To End Obamacare's Health Insurance Slush Fund

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This article is more than 8 years old.

There has been some interesting coverage lately about Florida Sen. Marco Rubio’s successful effort to ensure that taxpayers were not on the hook for excess losses incurred by insurers participating in Obamacare’s exchanges. Today, however, two Associated Press reporters alleged that this victory against the law was one that Rubio “didn’t deliver.” But the facts show that Rubio is right, and the AP is wrong.

(DISCLOSURE: I am advising Sen. Marco Rubio, but the opinions in this post are mine, and do not necessarily correspond to those of Sen. Rubio.)

How Obamacare's risk corridors became controversial

To understand what happened, we have to go back to 2013, as Obamacare’s exchanges were gearing up for their first year in operation. The Affordable Care Act contained a provision—Section 1342—that provided for “risk corridors” that would provide insurers with a cushion against losses on the exchanges over the first three years of their operations.

The basic idea was that insurers wouldn’t have a good handle initially on how to price their insurance products on the exchanges, because of Obamacare’s unprecedented nature. Insurers were afraid to roll out products on the exchanges and lose money if Obamacare’s enrollees were sicker than expected; risk corridors gave them an assurance that they wouldn’t be drenched with losses if enrollment went badly.

Risk corridors had been a successful part of the Medicare prescription drug benefit, and the ACA’s risk corridors were modeled after Medicare’s. But unique aspects of Obamacare made its risk corridor program less stable than Medicare’s.

First off, the Obama administration kept changing the rules of who could enroll on the exchanges—and when—especially after the heavy blowback from people whose plans had been canceled contrary to Obama’s “if you like your plan, you can keep your plan” promise. The White House abruptly decided to exempt millions of people from the law’s individual mandate, and kept moving back the end of the period during which people could sign up for coverage. All of these changes meant that insurers were dealing with a much sicker group of enrollees than they anticipated.

Furthermore, many health insurers—especially non-profit Blue Cross plans and government-sponsored “COOP” plans—took advantage of the Obamacare risk corridors to intentionally underprice their products. By underpricing their plans, these insurers could gain additional market share, comforted in the belief that taxpayers would cover their losses.

It was this latter problem that aroused the ire of Sen. Rubio. The Congressional Budget Office had assumed that Obamacare’s risk corridors would be deficit-neutral. But if the majority of insurers underpriced their products, believing that they were due for a taxpayer-financed cushion, the risk corridors could end up costing billions of dollars.

Rubio was the first to publicly raise concerns

Staffers at the Senate Budget Committee and the House Energy and Commerce Committee had been sniffing around Obamacare's risk corridors in the spring and summer of 2013. But Sen. Rubio was the first to publicly raise concerns about the issue. In a November 2013 op-ed in the Wall Street Journal, Rubio wrote, "While risk corridors can protect taxpayers when they are budget-neutral, ObamaCare's risk corridors are designed in such an open-ended manner that the president's action now exposes taxpayers to a bailout of the health-insurance industry if and when the law fails." Simultaneously, Rubio announced that he was introducing a bill, “The Obamacare Bailout Prevention Act,” to repeal Obamacare’s risk corridors.

Rubio’s hell-raising about Obamacare’s risk corridors was well covered at the time. No one disputes that Rubio was the first to raise concerns about risk corridors, nor that he was the first to introduce legislation to address their fiscal problems. I wrote about Rubio’s role here; Here’s Lanhee Chen in November 2013, making a strong case for Rubio’s point of view.

If you don’t want to take Lanhee’s or my word for it, because we’re now advising Rubio (but weren’t then), here’s Sahil Kapur of TalkingPointsMemo in November 2013, describing Rubio’s legislative foray, noting that Rubio’s spokesman told him that “Rubio is asking other senators to co-sponsor the bill and expects to introduce it…this week.”

Indeed, today’s Associated Press story, from Ricardo Alonso-Zaldivar and Sergio Bustos, doesn’t actually challenge Rubio’s central role. “There’s no dispute,” they write, “that Rubio was among the first politicians to criticize the ‘risk corridors' program.” Said Brian Blase, a former staffer with the House Oversight Committee and later the Senate Republican Policy Committee, who now contributes to The Apothecary, “It’s fair to say that [Rubio] raised the initial concerns.”

After Rubio's initiative, conservatives swung into action

The crux of the AP “fact-check” is Alonso-Zaldivar and Bustos pointing out that Rubio wasn’t solely responsible for ensuring that taxpayers weren’t on the hook for taxpayer losses. Well duh. Of course other staffers and legislators got involved; thanks to Rubio, the issue of risk corridors because a cause célèbre on the Right.

The House Oversight Committee, when Blase worked there, held hearings on the issue, and asked Rubio to be its star witness at one such session in February 2014. It was the Oversight Committee that first brought to light correspondence between insurers and White House consigliera Valerie Jarrett, warning that the elimination of risk corridors would lead to double-digit premium increases.

In 2014, Paul Winfree, who then served at the Senate Budget Committee, helped flush out some of the technical considerations which led to a successful bill, requiring the risk corridors to remain deficit-neutral, and prohibiting the Department of Health and Human Services from redirecting money from other programs to loss-making Obamacare insurers. Winfree's boss in 2014 was the ranking Republican member of the Senate Budget Committee, Sen. Jeff Sessions (Ala.)

So yes, other members of Congress and other Hill staffers—most notably, Winfree—played a role in getting deficit-neutral risk corridor legislation over the finish line. But for Alonso-Zaldivar and Bustos to argue that Rubio "didn't deliver" the victory is like saying only the wide receiver should get credit for a touchdown pass. No one disputes Rubio’s central role in bringing the issue to Congress’ and the public’s attention. No one disputes Winfree's role in identifying the technical path forward. Getting laws passed requires both public support and procedural success.

Winfree agrees. “Sen. Rubio raised the alarm even while the Congressional Budget Office was saying that the program would make the federal government money," he told me. "His message was important in the effort to block the transfer of money to the risk corridor program in the FY 2015 [continuing resolution omnibus bill]." Said Brian Blase, "The fiscal year 2015 funding bill complied with Sen. Rubio's suggestion, by prohibiting the Centers for Medicare and Medicaid Services from transferring money into risk corridors to bail out insurers for losses incurred in 2014."

Here’s a letter undersigned by a number of major conservative groups—including FreedomWorks, Heritage Action, Tea Party Express, and Americans for Tax Reform—saying they “strongly support” the efforts of Rubio and his partner, Arkansas Rep. Tim Griffin (R.), “to eliminate the ‘risk corridor’ payments in the Affordable Care Act that prevent participating companies from sustaining Obamacare-inflicted financial losses.”

Taxpayer losses on risk corridors would likely have never become a major national issue had Rubio not gone out of his way to raise it. In the winter months of late 2013 and early 2014, Rubio’s complaints about risk corridors were greeted with broad skepticism—including from me. Rubio was right, and I was wrong.

Marco Rubio’s campaign claim—that he is the one Republican presidential candidate who has landed a legislative blow against Obamacare—is incontrovertibly true. If the AP’s attempted “fact-check” of this claim is to be the mainstream media standard, we’re going to need more fact-checking of the fact-checkers.

*   *   *

UPDATE: Yuval Levin discusses the history of the risk corridor program over at National Review. He concludes:

So what, you might ask, does Marco Rubio have to do with this complicated story? The answer, it seems to me, is that none of it would have happened if Rubio had not made the risk-corridor insurer bailout an issue, starting in 2013. Before that, a few health wonks on the right had raised red flags about the issue, but it wasn’t until Rubio and his staff grasped its significance, insistently drew attention to it, and produced a bill to avert an insurer bailout that the issue became prominent among the priorities of Obamacare’s opponents. Rubio was without question the first and most significant congressional voice on this subject, and if he hadn’t done the work he did, the risk-corridor neutralization provision would not have been in last year’s (or this year’s) budget bill. 

In this sense, Rubio and his supporters are certainly right to say that he has done more than pretty much anyone to actually push back against Obamacare, and to force the system to confront the implications of its command and control economics...There is no question in my mind that Obamacare’s insurer bailout would not have been stopped if not for him. 

Yuval also accurately notes the role of staffers for other congressmen in inserting the specific language into the continuing resolution omnibus bill that prevented HHS from creating an unauthorized slush fund to support the risk corridors.

Glenn Kessler, unfortunately, seems to have ignored my and Yuval's accounts; he is up with a story at the Washington Post repeating the AP's inaccurate claim that Rubio's role in the risk corridor story was ceremonial.

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INVESTORS’ NOTE: The biggest publicly-traded players in Obamacare’s health insurance exchanges include Aetna (NYSE:AET), UnitedHealth (NYSE:UNH), Molina (NYSE:MOH), Anthem (NYSE:ANTM), and Centene (NYSE:CNC).

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