An American public already reeling from the catastrophic rollout of ObamaCare will more than likely be hearing an unfamiliar term being bandied about in the new year. “Risk corridor” refers to a provision in the law that allows the government to “stabilize” premium costs for insurance companies during the first three years of the healthcare rollout.
If insurance companies’ “target” costs for providing healthcare has been miscalculated, the Department of Health and Human Services (HHS) will intercede on their behalf. Syndicated columnist Charles Krauthammer illuminates the nature of that intercession. “The insurers understand that they’re going to be completely ruined,” Krauthammer explains. “And what’s going to happen as a result of this? There’s only one way out, a huge government bailout of the insurers is waiting at the end of next year.” More accurately, it will be a taxpayer-funded bailout, similar to the ones given to the banks and the car companies.
Risk corridors were established to protect insurance companies that signed up too many sick people, relative to the number of healthy enrollees. They were part of asystem that also included two other concepts known as “reinsurance” and “risk adjustment.”
The reinsurance part of the equation initially compensated insurance companies for enrollees whose costs exceed $60,000 per year. For 2014, that compensation is funded by a $10 billion fund, fed by a $63 tax that has been levied on all healthcare plans. And while the program collects those taxes even from large employer-sponsored plans, payouts only help to underwrite the costs of individual and small-group plans.
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