Rep. Lance Leonard, R-N.J. (File photo)

Some House Republicans want to curb the new Patient Protection and Affordable Care Act (PPACA) risk corridor program.

The House Energy and Commerce health subcommittee is holding a hearing today on H.R. 4406 and H.R. 5175 — two risk corridor program bills introduced by Rep. Lance Leonard, R-N.J.

  • H.R. 4406 would require the U.S. Department of Health and Human Services (HHS) to get all risk corridor program funding from health insurers.
  • H.R. 5175 would eliminate the risk corridor program altogether.

PPACA drafters created the program to protect insurers in the individual and small-group major medical markets against the effects of the new PPACA commercial health insurance programs. HHS is supposed to use money from health insurers that do unusually well to help health insurers that do unusually poorly. 

PPACA does not say what HHS should do if money from successful health insurers runs out. HHS says it will run the risk corridor program in a “budget neutral” fashion. Health insurers say HHS should help them if PPACA hurts health insurers so badly that most of them do poorly.

Jack Hoadley, a health policy specialist at Georgetown University, told the subcommittee that the PPACA risk corridor program and other PPACA risk-management programs are new versions of programs already in place at the Medicare Part D prescription drug program. 

“The best measure of their success is that participation by both health plans and Medicare beneficiaries is still robust in the program’s ninth year,” Hoadley said, according to a written version of his testimony posted on the committee website. 

The federal government earned a $1.1 billion profit on the Medicare Part D risk-management programs in 2012, Hoadley said. He added that about three-quarters of the Medicare Part D plan issuers are paying cash into the programs, rather than pulling cash out.

Edmund Haislmaier, a health specialist at the Heritage Foundation, said the PPACA risk corridor program is different from the Medicare Part D program. The companies selling PPACA-compliant individual major medical policies know a lot more about how those products will work than the designers of the first Medicare Part D plans knew about how those products would work, Haislmaier said.

“There does not appear to be much of a rationale for the risk corridor program as it is structured in the PPACA,” Haislmaier said. “While insurers certainly face a number of uncertainties with respect to how markets will operate under the new PPACA rules, and while it is likely that their ‘profit or loss risk’ will initially be somewhat elevated, the magnitude of the additional risk does not appear to be either unique or high enough to justify a risk-corridor program to mitigate profit and loss risks.”

PPACA also created a risk-adjustment program and a reinsurance program to protect insurers against the cost of covering high-risk and high-cost enrollees. Those programs are supposed to use their own revenue to pay for themselves. Those programs should be enough to protect insurers against any unusual, PPACA-driven shifts in the flow of risk, Haislmaier said.