More About Edwin Park

Edwin Park

Park is Vice President for Health Policy at the Center on Budget and Policy Priorities, where he focuses on Medicaid, the Children’s Health Insurance Program, and issues related to federal health reform.

Full bio and recent public appearances | Research archive at CBPP.org


Attack on “Risk Corridor” Program Falls Apart

November 13, 2014 at 12:32 pm

Congressional Republicans this fall may seek to repeal or block health reform’s temporary “risk corridor” program, designed to help cover any higher-than-expected costs for insurers that offer plans in the new marketplaces while sharing in the savings if costs are lower than expected.  They’ll likely make misleading claims about the risk corridors like those from Senator Marco Rubio and other Senate Republicans in a recent letter to House Speaker John Boehner.  These attacks simply don’t hold up under scrutiny.  Contrary to the Rubio letter:

  • The Administration has full authority to make risk corridor payments. The Rubio letter, citing a Government Accountability Office (GAO) legal opinion, claims that the Administration would violate the Constitution if it makes any risk corridor payments to insurers because it lacks the authority to do so.  But as we recently noted, the GAO opinion actually says the opposite.  Agreeing with the Administration, the GAO finds that the Centers for Medicare and Medicaid Services (CMS), which administers the risk corridors, has the authority to use contributions from insurers with lower-than-expected costs to finance payments to insurers with higher-than-expected costs.  In fact, GAO finds that CMS has the authority to use its regular operating funds to finance risk corridor payments as well.
  • The risk corridor program will be budget neutral. The Rubio letter says that the risk corridor program will put taxpayers at risk if insurers systematically face higher-than-expected costs, which could cause risk corridor payments to exceed contributions.  But the Administration has already issued regulations and guidance ensuring that the program will be budget neutral to the federal government over its three-year existence.

The Rubio letter also fails to mention that repealing or blocking the risk corridor program would result in higher premiums for marketplace plans.  That’s because the program helps keep premiums affordable by reducing uncertainty for insurers.  

Health reform’s major reforms to the poorly functioning individual insurance market (like prohibiting insurers from charging higher premiums to people in poorer health or excluding them entirely) and the launch of its new marketplaces have temporarily raised insurers’ uncertainty in pricing their premiums during the marketplaces’ first few years.  If Congress blocked the risk corridors, insurers would have to build a bigger “risk premium” into their premiums for 2016, making coverage less affordable.  (Insurers have already finalized their 2015 rates.)  And some insurers might decide not to participate in the marketplaces in 2016.

If Congress enacts legislation denying the Administration the authority to make risk corridor payments, that would be virtually certain to drive up the cost of health insurance provided through the marketplaces.

GAO: Administration Can Make Health Reform’s “Risk Corridor” Payments

October 10, 2014 at 1:16 pm

Health reform’s opponents are renewing efforts to kill its temporary “risk corridor” program, through which the federal government will help cover any higher-than-expected costs for insurers that offer plans in the new marketplaces while sharing in the savings if costs prove lower than expected.  But the Government Accountability Office (GAO) legal opinion on which they’re basing this latest attack says the opposite of what they claim.

Citing the GAO opinion, opponents claim that the Administration lacks the legal authority to provide risk corridor payments and that legislation is needed to prevent it from making unlawful payments.  But GAO actually concludes that the Centers for Medicare and Medicaid Services (CMS), which administers the risk corridors, has the authority to use contributions from insurers with lower-than-expected costs to finance payments to insurers with higher-than-expected costs.

GAO finds that CMS has the authority to use its regular operating funds to finance risk corridor payments as well.  But the Administration has made clear that the risk corridor program, which will exist for three years (2014-2016), will be budget neutral over that period — that is, payments won’t exceed contributions.

CMS would only lack authority to make risk corridor payments, GAO finds, if Congress specifically blocked it as part of legislation funding the government for the rest of fiscal year 2015 (when the payments associated with health coverage in 2014 are scheduled to be made).  The GAO opinion thus offers no basis for repealing the risk corridor program or stopping it from taking effect.

Moreover, repealing or blocking the program would result in higher premiums for marketplace plans.  That’s because the program helps keep premiums affordable by reducing uncertainty for insurers.  Health reform’s major reforms to the poorly functioning individual insurance market (like prohibiting insurers from charging higher premiums to people in poorer health or excluding them entirely) and the launch of its new marketplaces have temporarily raised insurers’ uncertainty in pricing their premiums during the marketplaces’ first few years.

If Congress blocked the risk corridors now, insurers would build a bigger “risk premium” into their premiums for 2016, making coverage less affordable.  (Insurers have already finalized their 2015 rates in many states.)  And some insurers might decide not to participate in the marketplaces in 2016.

Once insurers have had several years of actual claims experience with their marketplace plans, they’ll be able to price their premiums with more confidence and accuracy.  At that point, the risk corridors will no longer be needed and will expire as scheduled.

Damaging House Bill Would Undo Health Reform Protections and Raise Small Business Premiums

September 9, 2014 at 2:02 pm

The House this week is scheduled to consider a bill sponsored by Rep. William Cassidy (R-LA) that would allow insurance companies, through 2018, to continue to offer to any small employer the health insurance plans in the small group market that the insurers were selling in 2013.

In short, the bill is another attempt to undermine health reform and try to ensure it doesn’t succeed, as we explain in a new analysis:

Under the bill, such plans would not have to comply with the Affordable Care Act’s (ACA) market reforms and consumer protections that otherwise apply to all health insurance plans offered in the small group market, starting in 2014.

The bill would go well beyond the existing Administration transition policy that permits states to allow insurers to continue — through 2016 — to offer non-ACA-compliant plans in the individual and/or small group market to individuals and employers who were previously enrolled in such plans. . . [T]he Cassidy bill would likely have serious adverse effects both on premiums in the small group market — causing them to rise substantially for many small firms — and on health reform’s consumer protections, such as the reform that prevents insurance companies from charging higher premiums to firms with older, less healthy workforces.

Click here to read the full paper.

CBO Findings Refute the Medicare Part D Myth

August 6, 2014 at 2:37 pm

The Medicare drug benefit’s lower-than-expected costs do not reflect efficiencies produced by competition among private insurers, as we’ve repeatedly explained.  The main factors were the slowdown in per-capita drug spending throughout the U.S. health care system and lower-than-expected Medicare Part D enrollment — and the Congressional Budget Office (CBO) concurred with our analysis in a recent report, finding:

  • National drug spending growth fell unexpectedly because many drugs went off-patent, the use of lower-cost generic drugs increased substantially, and fewer new drugs, which tend to be more costly, came to market.  National drug spending in 2012 was therefore much lower than what the Centers for Medicare and Medicaid Services’ actuaries projected in 2003 when the Medicare drug benefit was enacted.  CBO states that “spending per beneficiary in Part D has been lower than CBO projected in part because of those developments affecting nationwide drug spending.”
  • Part D enrollment was also lower than CBO projected — by 12 percent, in 2012.  CBO originally assumed that participation in the drug benefit would be similar to enrollment rates in Medicare Part B.  But CBO now believes that Part D participation is lower than in Part B likely because Medicare beneficiaries must actively enroll in the drug benefit — which can reduce participation — while eligible individuals are automatically enrolled in Part B and must actively opt-out.
  • CBO thus concludes: “Taken together, the unexpected slowdown in national drug spending per person and smaller-than-expected enrollment in Part D can account for nearly all of the difference between CBO’s original estimate and actual Part D spending” (italics added).

That’s all consistent with our analysis as well as that of the Kaiser Family Foundation, which found that there “is compelling evidence that factors other than competition offer the best explanations for the lower-than-expected spending trend” in Part D.

Today’s Conflicting Court Decisions Won’t Affect Federal Marketplace Subsidies

July 22, 2014 at 3:35 pm

Two federal appellate courts issued rulings today that relate to the health reform law.  In a unanimous decision, a panel of the U.S. Circuit Court of Appeals for the Fourth Circuit upheld a lower court decision finding that individuals are eligible for premium subsidies to purchase health insurance through the federal marketplace, just as they can in state-based marketplaces.

In a 2-1 decision that has received considerably more media attention, the D.C. Circuit Court of Appeals overturned a lower court ruling and ruled that premium subsidies can be used to purchase coverage only through state-run marketplaces, and not through the federal marketplace.

What do these decisions really mean?

  • Premium subsidies for the millions of federal marketplace enrollees will continue to be available, as the Administration confirmed today.
  • The Administration will appeal the D.C. Circuit court decision to the entire D.C. Circuit, where it will likely be reversed, as Washington and Lee University School of Law professor Timothy Jost explained earlier this month.
  • That’s because, as we first noted two years ago, the merits of the legal theory challenging subsidies for federal marketplace enrollees are extraordinarily weak, relying on a distorted, incorrect reading of the Affordable Care Act and ignoring legislative intent and history.