Marco Rubio Quietly Undermines Affordable Care Act

WASHINGTON — A little-noticed health care provision slipped into a giant spending law last year has tangled up the Obama administration, sent tremors through health insurance markets and rattled confidence in the durability of President Obama’s signature health law.

The attack stems from two years of effort by Senator Marco Rubio and others in Congress to undermine a key financing mechanism in the law. So for all the Republican talk about dismantling the Affordable Care Act, one Republican presidential hopeful has actually done something toward achieving that goal.

Mr. Rubio’s efforts against the so-called risk corridor provision of the health law have hardly risen to the forefront of the race for the Republican presidential nomination, but his plan limiting how much the government can spend to protect insurance companies against financial losses has shown the effectiveness of quiet legislative sabotage.

The risk corridors were intended to help some insurance companies if they ended up with too many new sick people on their rolls and too little cash from premiums to cover their medical bills in the first three years under the health law. But because of Mr. Rubio’s efforts, the administration says it will pay only 13 percent of what insurance companies were expecting to receive this year. The payments were supposed to help insurers cope with the risks they assumed when they decided to participate in the law’s new insurance marketplaces.

Mr. Rubio’s talking point is bumper-sticker ready. The payments, he says, are “a taxpayer-funded bailout for insurance companies.” But without them, insurers say, many consumers will face higher premiums and may have to scramble for other coverage. Already, some insurers have shut down over the unexpected shortfall.

“Risk corridors have become a political football,” said Dawn H. Bonder, the president and chief executive of Health Republic of Oregon, an insurance co-op that announced in October it would close its doors after learning that it would receive only $995,000 of the $7.9 million it had expected from the government. “We were stable, had a growing membership and could have been successful if we had received those payments. We relied on the payments in pricing our plans, but the government reneged on its promise. I am disgusted.”

Blue Cross and Blue Shield executives have warned the administration and Congress that eliminating the federal payments could have a devastating impact on insurance markets.

Twelve of the 23 nonprofit insurance cooperatives created under the law have failed, disrupting coverage for more than 700,000 people, and co-op executives like Ms. Bonder have angrily cited the sharp reduction in federal payments as a factor in their demise.

But Mr. Rubio is pressing forward, demanding a provision in the final spending bill now under negotiation that continues the current risk corridor restrictions, or even eliminates the program altogether. That enormous spending bill is being worked out as Congress slides toward a deadline of Friday, when much of the federal government’s funding runs out.

“If you want to be involved in the exchanges and you lose money, the American taxpayer should not have to bail you out,” Mr. Rubio said on the Senate floor on Thursday.

A White House spokeswoman, Katie Hill, declined to offer the administration’s position on proposals that she said were still theoretical. “We are not going to weigh in on the possible inclusion of proposals floated by members of Congress” in potential legislation, she said.

Congress established the program in 2010 to protect insurers against the uncertainties they faced in setting the level of insurance premiums when they did not know who would sign up for coverage under the Affordable Care Act. Under the law, the federal government shares risk with insurers, limiting their gains and losses on insurance sold in the public marketplaces from 2014 through 2016. If consumer payments to an insurer exceed the company’s medical expenses by a certain amount, the insurer pays some of that profit to the government. But if premium payments fall short of medical expenditures by a certain amount, the insurer is eligible for payments from the government.

The hope was that payments into the program would be in balance with payments out, shielding taxpayers from responsibility.

Mr. Rubio latched on to the issue in late 2013, recognizing not only the importance of risk corridors to the operation of the Affordable Care Act but also the political potency of a program he labeled crony capitalism — putting taxpayers “on the hook for Washington’s mistakes,” as he said when he reintroduced his risk corridor bill in January.

The “bailouts” of big banks and other financial firms during the economic crisis of 2008 and the rescue of the Big Three automakers that year and the next remain politically unpopular.

Then the numbers rolled in from the insurance exchanges’ first year of operation: Losses were so steep that insurance-company requests for risk corridor payments were $2.9 billion, compared with only $362 million paid into the program by profitable plans.

Mr. Rubio says he “saved taxpayers $2.5 billion” — the difference between those two amounts — because his measure prevented the government from using other sources of money for the risk corridor payments.

The administration has repeatedly told insurers that it will explore other funding sources to keep its commitment to companies losing money in the exchanges, but Mr. Rubio effectively tied the hands of federal health officials this year.

Like many other observers of the health law, the Obama administration initially failed to appreciate the impact of the Rubio restrictions. Kevin J. Counihan, the chief executive of the federal insurance marketplace, told state officials in July that money collected from insurance companies would be “sufficient to pay for all risk corridor payments.” More recently, the administration consoled insurers by telling them that it would make additional risk corridor payments from money collected in 2015 and 2016.

But in a new report, the credit ratings agency Standard & Poor’s says that money will not be there.

Mr. Rubio says Mr. Obama compounded his problems by diverting risk corridor funds to quell a 2013 furor over canceled insurance policies. That year, the president announced that states could let insurers renew canceled plans and continue coverage for several years even if those policies did not meet the requirements of the federal health law.

Insurers were shocked by the sudden change. They had set 2014 premiums on the assumption that healthy people with old insurance policies would move into the new marketplace, but Mr. Obama allowed many of them to stay out. In a letter to state insurance commissioners in November 2013, the administration said “the risk corridor program should help ameliorate unanticipated changes in premium revenue.”

Five days later, Mr. Rubio introduced his bill to kill the risk corridor program.

Insurers now are lobbying to get more of the money they say they were promised, or to get relief in some other form.

Mr. Rubio has highlighted the role of Marilyn B. Tavenner, the former Obama administration official in charge of rolling out HealthCare.gov who is now president of the trade group America’s Health Insurance Plans.

“The former Obama administration official who led the rollout of Obamacare’s exchanges and now runs the health insurance lobby is working with her White House allies to secure a new bailout by providing more funding for the law’s risk corridor program,” Mr. Rubio said last week.

Clare Krusing, a spokeswoman for the insurance group, said the federal payments were not a bailout for the industry, but a way of stabilizing the market and thus protecting consumers. “When health plans cannot rely on the government to meet its obligations,” she said, “individuals and families are harmed.”