Revenge of the Rubio-Con: Marco Rubio's Risk Corridor Massacre could cost taxpayers up to $12.3 billion

OK, first take a few minutes to read all of this.

I'll wait.

OK, done? Good. Now read this (via Stephanie Armour of the Wall St. Journal):

Health insurers and the Trump administration face a court decision shortly that will determine whether the government must pay insurers billions of dollars despite Republican efforts to block payments they view as an industry bailout.

Insurers have filed roughly two-dozen lawsuits claiming the federal government reneged on promises it made to pay them under the Affordable Care Act.

...It could also shape the outcome of other insurer lawsuits that would leave the government potentially owing as much as roughly $20 billion in past and future payments. Those cases, legal experts say, amount to the largest civil lawsuits ever.

More than money is at stake, however. If the federal government loses the lawsuits, the Trump administration could find itself forced to financially support a health law it has been seeking vigorously to undo.

...The standoff focuses partly on a program known as “risk corridors” that sought to entice insurers into the ACA markets by helping cover their financial risk.

...Insurers say the administration promised to cover certain losses even if it didn’t collect enough from participating insurers. But Republicans have put provisions in the federal budget saying the program can only pay out as much as it collected, creating a shortfall for insurers that totaled about $12.3 billion.

Insurers also say the administration reneged on “cost-sharing reduction” payments to be provided through a separate ACA program. The health law required insurers on the exchanges to offer subsidies to some low-cost consumers, and the insurers say the Obama administration promised to cover the subsidies’ costs.

...Insurers lost out on about $2 billion last year, and they would have gotten about $8 billion this year. Some are suing for both back payments and those that had been expected this year.

That's where the $20 billion figure comes from--$12.3 billion of it is the Risk Corridor Payments which the carriers were stiffed out of, $2 billion is from the past-due Cost Sharing Reduction reimbursements from the fourth quarter of last year (remember, Trump pulled the plug in September 2017, cutting off payments for October, November and December), and the remaining $8 billion is what the carriers should be owed for 2018. To be honest, I'm pretty sure that no matter what the judges end up ruling overall, the $8 billion in 2018 CSR payments will not be granted. The vast majority of carriers have already jacked up their premiums by an extra 14% or so to cover their projected 2018 CSR losses, so this would be double-dipping.

The other $14.3 billion, however, is absolutely owed to them...even though there's a slight snag in that as well:

...Some of the insurers in the other cases have gone out of businesses since filing the lawsuits, raising questions about who may get the funds if the government loses. And some of the claims have been sold to private investors who would now stand to get the money.

There's another important point here: The "Full Faith & Credit of the United States" is at risk:

If the administration wins, others may become leery of contracts with the federal government, fearing agreements may later be blocked by an opposing political party, legal experts said.

“When the federal government has made a promise to pay and doesn’t, how do you enforce it?” Mr. Bagley said. “It makes it harder for parties to trust the government.”

What's that? Donald Trump stiffing contractors who kept up their part of the bargain in good faith? Say it ain't so!

In all seriousness, I admit the headline is a bit misleading, since for the most part the $12.3 billion Risk Corridor portion of the lawsuit would have been paid out to the carriers without Rubio's stunt in 2014 anyway, so it's not necessarily costing the taxpayers $12.3B more. HOWEVER, the Massacre didn't exist in a vacuum--if the RC funding hadn't been cut off in 2015, at least a few of the carriers which went belly up (most of them were ACA-created Co-Ops) would still be in business today, while other carriers which took a bath but stayed in business wouldn't have decided to bail on the ACA exchanges in various states, and so on.

Put another way: If the carriers hadn't been stiffed out of billions at the time, the odds are very good that overall losses would have been much lower in 2015 and 2016...which means instead of $12.3 billion being owed, it likely would've been quite a bit less (perhaps $5-$6 billion)? We'll never know now, of course.

In other words, the Risk Corridor Massacre caused a chain reaction of #FAIL: A dozen-plus smaller carriers went out of business and others dropped out of the market, which in turn reduced competition, which in turn led to a worse risk pool and higher premiums, which in turn led to more carriers dropping out the following year and so on.

I'm not saying that this was the only factor which caused those things to happen, but it sure as hell played a major role.

It also, as I noted in the link at the top of this entry, put several hundred people out of work and kicked 800,000 people off their healthcare policies at the end of 2015.

As David Anderson (aka "Richard Mayhew") put it at the time:

...So the Rubio rider causes a lot of chaos, does not actually solve the problem it is superficially intended to solve, costs the government more money in the short term as the benchmarks are recalculated upwards, and costs the government more money in the long term as there are fewer insurers and thus less competition. The big winners are Rubio (as he gets to fundraise and preen off of it) and incumbent insurers that have large cash reserves.


The ultimate irony is that the main reason Rubio went through the trouble of doing all of this was to help suck up to GOP primary voters for his impending 2016 Presidential race...which he failed miserably at anyway.

Which means he literally did it for nothing at all.