by Edmund F. Haislmaier
The Heritage Foundation
July 07, 2014
How individuals and employers will respond to the changes imposed by the Patient Protection and Affordable Care Act (PPACA) is uncertain, which makes it difficult for insurers to predict claims costs and set premiums. Anticipating these effects, the PPACA includes three risk-mitigation provisions. One of these programs establishes a “corridor” for profits or losses for insurers selling exchange coverage. If an insurer has higher than expected profits, the government will “claw back” some of the money. If the insurer has higher than expected losses, the government will pay the insurer additional subsidies to offset those losses. This program is not required to be budget neutral – and even assuming the most generous estimates, it won’t be. Given that the program lacks an appropriate rationale and will likely generate a slew of new taxpayer liabilities. The best solution would be for Congress to eliminate it.



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