Republican Senator Marco Rubio of Florida will introduce a bill today that represents a new and potentially crippling line of attack against the Affordable Care Act, aka Obamacare. The first line of attack entailed Republican efforts to try to repeal the law outright. That failed. Next came bills Republicans and Democrats introduced to allow people whose insurance plans were cancelled to extend them. This would keep an important group of mostly healthy people from participating in the federal exchanges, driving up costs. These bills are in limbo, but President Obama’s “fix” to the law could have a similar effect, if insurers and state regulators go along.
Rubio’s bill takes a new tack by seeking to abolish “risk corridors,” one of several mechanisms in the law meant to hold down premium costs and entice insurers to participate in the exchanges by ensuring they won’t lose a lot of money if they draw a costlier applicant pool than anticipated. Risk corridors function like Major League Baseball profit-sharing: Insurers who wind up with unexpectedly healthy applicants and lower costs will “pay in” money to the government, which in turn “pays out” to insurers with costlier applicants, thereby stabilizing the nascent market.