Republican members of the House of Representatives are at a retreat on the Eastern Shore of Maryland, which is a good place for them to hatch dumb ideas, like tying the next debt ceiling increase to a repeal of the “risk corridor” provisions of Obamacare. According to the Washington Post’s Robert Costa, this idea is “gaining steam” in the Republican conference.
First, here’s a refresher on what “risk corridors” are: These are reinsurance rules that are supposed to help insurers deal with the uncertainty of costs in Obamacare’s first three years.
Insurers don’t know how old and sick people who sign up for new health plans will be, so they don’t know how much they’ll have to pay out in claims. That uncertainty could drive insurers to set high premiums, which would induce some healthy people to not buy insurance, necessitating even higher premiums and leading to a “death spiral” of high premiums and low participation. To prevent that outcome, the government is effectively reinsuring the insurers for the first three years of Obamacare: If claims exceed expectations during the first three years, the government will cover much of the excess cost; if claims are less than expected, insurers will pay the government.
The risk corridors will help insurers resist the temptation to raise premiums on the basis of first-year performance; if claims in 2014 are high, insurers can rely on the reinsurance payments and hope the participant pool broadens out by the time the risk corridor program ends in 2017. But since Republicans want Obamacare to fail and the insurance plans in its marketplaces to become unaffordable, they want to repeal the risk corridor program and spark a sharp rise in insurance premiums in 2015.
Of course, Democrats will not agree to this, so Republicans are talking about bringing back their old strategy of tying unrelated policy riders to debt ceiling increases.
As I wrote back in August, this won’t work either, because Republicans and Democrats both know that Republicans will get tagged with the blame for any economic crisis that ensues from hitting or approaching the debt limit. Democrats can win any debt ceiling fight by repeatedly saying “no” to anything other than a clean increase. That’s why, in 2013, the Republican-controlled house twice (in January and October) passed debt ceiling increases without meaningful policy concessions, after insisting that they would only raise the debt ceiling in exchange for meaningful policy concessions.
Smarter Republican officials understand that this strategy still won’t work. Last week, Tennessee Sen. Bob Corker (R-Tenn.) told Business Insider this winter’s debt ceiling fight “might not be quite as climactic” as previous ones. But even if Republicans know they won’t get anything in exchange for raising the debt ceiling, they’re likely to feel the need to show conservatives that they “tried.”
So I won’t be surprised if the Republican House votes out a bill that raises the debt ceiling in exchange for repealing the risk corridors. If they don’t, it will be because they couldn’t line up 218 Republican votes for such a bill, with conservatives objecting on the grounds that it doesn’t extract enough concessions. But we all know how this movie ends: With a coalition of House Republicans and Democrats passing a clean debt ceiling increase, on terms laid out by the Senate.
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