February 4, 2014

TO THE MEMBERS OF THE UNITED STATES CONGRESS:

The U.S. Chamber of Commerce, the worlds largest business federation representing the
interests of more than three million businesses of all sizes, sectors, and regions, as well as state
and local chambers and industry associations, and dedicated to promoting, protecting, and
defending Americas free enterprise system, urges you to consider the harm that would be caused
by the repeal of the risk mitigation programs as contained in the Patient Protection and
Affordable Care Act (PPACA).
Recently, certain policymakers have been examining the purposes of the programs
collectively known, as contained in the PPACA, as the 3 Rs, that is, the risk corridor program,
the transitional reinsurance program, and the risk adjustment program. As our business members
continue to struggle with the market disruption associated with the implementation of the
PPACA, the Chamber urges you to carefully consider the wide-ranging ramifications that any
changes to these market stabilization mechanisms may have. If the market is disrupted, it would
lead to higher costs and fewer choices for small business owners and the self-employed.
These risk mitigation programs were collectively created to mitigate the financial risk and
uncertainty facing private sector businesses as they offer products in the newly restructured small
group and individual markets. Facing a host of new rating limitations, mandated coverage
requirements, and a likely influx of new consumers, these companies relied on the safeguards
that the risk mitigation programs were designed to provide. Businesses chose to offer products
in these markets based on the understanding that financial harm or benefit would be moderated
both in circumstances where the prices they set far exceeded the costs they incurred and in
circumstances where the prices they set fell far short of the costs they incurred.
The purpose of these provisions is to help stabilize the new markets and provide some
protection to consumers and businesses enrolled in and offering coverage for the first few years
in particular. The provisions were deliberately included in the law to protect businesses offering
products in these new markets with no valid historical data in the initial years to guide them in
setting the price of products that consumers could buy regardless of pre-existing conditions.
Without these provisions, consumers would have seen much higher premiums and far fewer
products offered in the individual and small group markets.
Beyond the practical importance of these risk stabilizing provisions, they have also
successfully encouraged private sector engagement and participation in other new and/or high
risk insurance programs. A little over a decade ago, the legislation enacting Medicare Part D

included similar risk stabilization programs to encourage choice and competition for the first six
years of the 2003 stand-alone prescription drug program. Other programs, such as flood
insurance, crop insurance, and terrorism risk coverage, similarly rely on these types of mitigating
provisions.
Further, according to a newly released Congressional Budget Office (CBO) report, the
government will in fact collect more money than it pays out under this program. In an estimate
released today, CBO projects that under the new risk corridor program insurers will pay in $16
billion while the government will pay out only $8 billion, resulting in $8 billion in net
government revenue.
The problem with repealing these provisions is that it would effectively harpoon the rates
that were established based on the very protections these provisions promised. It would change
the rules of the game in the middle of the game and cause some private businesses to lose big
and others to potentially win big. Repeal would make it harder and less likely that companies
will offer products to small businesses and individuals in the future and would certainly lead to
significantly higher premiums for coverage offered next year without these protections. It would
limit choice, increase premiums, and hinder the development of a robust private insurance
market. And as the American Action Forum points out in its February 4, 2014, backgrounder,
[I]t is worth noting that the provisions keeping premiums lower will also reduce federal
spending on the exchange subsidies. In the absence of the risk mechanisms, higher health
insurance premiums would result in more households qualifying for subsidies and increased cost
for those who are subsidized.
Therefore, to protect both consumers and business, the Chamber urges you to consider
the extreme harm that eliminating these programs during the most critical phase of
implementation would cause. It is crucial that additional reforms strengthen and protect
individuals, business, and the health care system at large, not harm it further. Repealing the risk
mitigation programs would clearly be a step in the wrong direction.
Sincerely,

R. Bruce Josten