The Health Insurance Bailout


We have mentioned here on this site that we fear the departure of insurers from the exchange will result in a bailout to keep them on board.  Well, it seems Forbes is concerned as well.  In their article The Biggest Threat To Obamacare Is Already Written Into Law: No Insurance Industry Bailouts they point out:


  • How things have changed. Today, Democrats in Congress and the Obama administration are desperate to do something you may find surprising: give the insurance companies more than about $2.5 billion in bail out money. That’s not a misprint. They want to take tax money from people who already think their premiums are too high and their coverage too skimpy and give it to the very “villains” they were excoriating only a few years ago.
  •  Under a program called “risk corridor” insurance, the federal government pledged to redistribute money from insurers who made profits to insurers who incurred losses for a period of several years. The reason: the insurance industry was so uncertain about the outcome of the (Obamacare) health insurance exchanges that they insisted on a backup mechanism to protect themselves.
  • Yet last year’s appropriations bill, largely at the insistence of Sen. Marco Rubio, requires that the risk corridor payments be revenue neutral. In other words, any payment of funds to an insurance company suffering from a deficit must come from insurance companies who earned a profit. There can be no net transfer of taxpayer funds to the industry.
  • As Heather Higgins and Hadley Heath Manning explain at National Review, the Rubio provision expires at the end of this year. If the federal government is to continue to be constrained, it must be renewed in this year’s Omnibus spending bill. And in negotiating with Congressional Republicans, the White House has made it clear that being able to bail out insurers is its top priority.
  • If the risk corridor language is stripped from the Omnibus, insurers who are implementing Obamacare will feast on roughly $5 billion or more of corporate welfare ($2.5 billion for the 2014 plan year and probably at least that much for the 2015 plan year), and they will go into the spring bidding process confident that the government will slip them billions if they continue to play ball with the Administration.
  • Further health policy analyst Chris Jacobs has raised the possibility that the administration could try to pay the insurers anyway — even without congressional approval: Acting Centers for Medicare and Medicaid Services (CMS) Administrator Andy Slavitt … released an unsigned memo just before Thanksgiving pledging eventually to hand over the $2.5 billion in 2014 risk corridor payments insurers requested, but did not receive. Now, the Administration “is recording those amounts that remain unpaid…as fiscal year 2015 [sic] obligation of the United States Government for which full payment is required.”

This, ladies and gentlemen, is your government at work.

78060cookie-checkThe Health Insurance Bailout