How Big Of A “Bailout”?

Cohn defends Obamacare’s risk corridors, which Republicans are calling an “insurer bailout”:

Suppose the conservative critics are right. Suppose that most insurers end up taking losses—and that, as a result, the risk corridor program ends up costing the taxpayers money. How much would it really be? Nobody has done the official math on how big the payouts could get. But James Capretta and Yuval Levin, writing in the Weekly Standard, say “This year it could easily cost taxpayers hundreds of millions and perhaps billions of dollars.” That’s consistent with what I’ve heard informally from experts. And in the context of the Affordable Care Act—let alone the entire federal budget—that’s not a ton of money. Remember, the original CBO projections suggested that the federal government would spend about $26 billion on exchange subsidies and nearly twice that on the coverage expansion as a whole.

Here’s where we get to the least familiar—and potentially most important—argument of the whole debate. The premiums insurance companies are offering this year are lower than the CBO expected. As a result, the federal government will probably end up spending less—quite possibly a lot less—subsidizing private insurance for the poor and middle class. So even if the taxpayers have to pay more to insurers through risk corridor payments, they will be paying less to insurers through subsidies. And this isn’t just some happy coincidence: The higher risk corridor payments and lower subsidies are products of the same root cause.