NTU writes in support of the “Obamacare Taxpayer Bailout Prevention Act,” S. 123 and H.R. 221

The Honorable Marco Rubio
United States Senate
284 Russell Senate Office Building
Washington, DC 20510
The Honorable Andy Harris, MD
United States House of Representatives
1533 Longworth House Office Building
Washington, DC 20515

Dear Senator Rubio and Congressman Harris:

            On behalf of the members of the National Taxpayers Union (NTU), I write in support of the “Obamacare Taxpayer Bailout Prevention Act,” S. 123 and H.R. 221 in the Senate and House respectively. This legislation would repeal Section 1342 of the President’s health care law, ensuring that taxpayers aren’t on the hook for insurance company losses incurred in the implementation of the plan.

            Section 1342 of the Patient Protection and Affordable Care Act (PPACA) creates “risk corridors” that constitute a tax on insurance plans in order to fund government interference in the marketplace. Intended to dissuade providers from picking and choosing the healthiest customers, insurers are required to pay the Department of Health and Human Services (HHS) when costs undershoot anticipated targets. In the event that costs exceed those targets, HHS will pay insurers as much as 80 percent of the overage. In essence, the risk corridors pay health insurers who miscalculate actuarial risk, potentially exposing taxpayers to expenditures  if health insurers have higher than expected costs.

            It would be an understatement to suggest that current cost projections can’t be taken at face value. Various delays, extensions, and fixes, which suffer from flaws of their own, are confounding risk calculations. Disagreement over how to account for enrollment figures and who qualifies for subsidies all make it difficult to anticipate just how much taxpayers could stand to lose through Section 1342.

            A short-term provision in the FY15 omnibus spending bill prohibits taxpayer funds from being paid out to insurers; however, after September 30, unless Congress passes S. 123 and H.R. 221, taxpayers could once again shoulder the risk insurance companies assume.

            Taxpayers shouldn’t be forced to underwrite the mistakes of insurance companies, especially given the uncertainty in the marketplace. NTU is pleased to endorse S. 123 and H.R. 221; we urge all Congressmen to support this legislation and work toward its swift enactment.


Nan Swift
Federal Affairs Manager