Risky Corridors

by Ramesh Ponnuru

In my new Bloomberg View column, I argue that Republicans should advance a bill to cap or repeal Obamacare’s “risk corridors,” which insurers and the administration are counting on using to bail out the former:

Jonathan Cohn, a defender of Obamacare and the risk corridors, notes that the payouts “have no actual limit.” But payouts to insurers wouldn’t be a bailout, Cohn writes, because the insurers haven’t made “egregiously irresponsible actions.”

What they did was make business plans that included supporting Obamacare and participating in it. Those business plans, like any other, depended on certain assumptions — in this case, that the program would work well. When the assumptions behind a company’s plans turn out to be wrong, and the federal government protects the company from the losses that would normally result, it’s reasonable to call that a bailout — and to object. Taxpayers, after all, took no irresponsible actions.

Another assumption the insurers made was that a bailout would be politically sustainable. That assumption will also be tested. Obamacare has always depended, both operationally and politically, on an alliance between the administration and insurance companies. But that alliance is vulnerable. The most controversial element of Obamacare to date — the coercive measures it includes to get people to buy insurance — is only there to protect the insurance companies’ viability. A bailout could be just as unpopular a sop to the insurers.