I think you've misread the question. I understood it as "what if the US gov doesn't (recognize the risk and allow insurers to raise rates)" rather than "what if

I think you've misread the question. I understood it as "what if the US gov doesn't (recognize the risk and allow insurers to raise rates)" rather than "what if the US gov (doesn't recognize the risk) and (allow insurers to raise rates)." It makes sense that way, plus if "allow insurers to raise rates" was a separate clause the verb should be "allows".