by John R. Graham
National Center for Policy Analysis
August 21, 2014
In March 2014, the administration proposed a rule that, among other things, increased taxpayers’ exposure to Obamacare’s risk corridors by adjusting the risk corridors formula. The rule would “raise the administrative cost ceiling by 2 percentage points, from 20 percent to 22 percent,” and “increase the profit margin floor in the risk corridors formula (currently set at 3 percent, plus the adjustment percentage, of after-tax premiums)” from 3 percent to 5 percent. However, there is no guarantee whatsoever the change in the formula will be budget-neutral over the three-year period of the risk corridors. In April 2014, based on the administration’s assumptions, the Congressional Budget Office lowered its estimate of the effect of risk corridors from an $8 billion surplus to budget neutrality. From a taxpayer’s perspective, the estimate is moving in the wrong direction.