News Column

EDITORIAL: The biggest bailout

August 26, 2014

The Augusta Chronicle, Ga.



Aug. 26--Thought the days of taxpayer-funded bailouts were over? The next one is just over the horizon.

A new study confirms one of the worst fears about Obamacare -- that taxpayers likely will be forced to bail out health insurance companies that are losing money in the president's signature health-care scheme.

As expected, insurers pressured by the administration to set premiums artificially low are bleeding red because the Affordable Care Act has

attracted too many old and sick people and not enough young and healthy people.

And provisions in the law protecting companies from losses will shift the burden to The Government's Favorite ATM.

"Taxpayers are on the hook to bail out health insurers," said John R. Graham, a senior fellow at the National Center for Policy Analysis and author of the study Risky Business: Will Taxpayers Bail Out Health Insurers? "The law does not even limit taxpayers' exposure, and no government agency has a credible estimate of how much taxpayers' money is at risk."

Turns out the nebulous ACA law -- the one Congress had to pass so you could "find out what's in it" -- backstops insurers' risks three ways. One of those is called risk adjustment, and consists of money transfers between insurers that enroll unexpectedly healthy people and those that enroll unexpectedly sick people.

The other two -- reinsurance and risk corridors -- involve your wallet.

Reinsurance protects insurers that enroll unexpectedly sick people; taxpayers' costs are limited to $25 billion over three years. But it's the law's Section 1342, the so-called risk corridors, that looks most troubling. It also lasts three years, but it makes taxpayers unlimitedly liable for the insurers' profit and loss statements beyond a certain level.

In other words, taxpayers easily could be forced to cover billions in losses if the balance of risk in the health exchange system goes out of whack and the pool of cash from profitable insurers is exhausted.

Republicans raised the red flag in November when U.S. Sen. Marco Rubio, R-Fla., introduced S.1726, the "ObamaCare Bailout Prevention Act," which would eliminate the ACA provisions allowing for tax-funded bailouts. The bill never went anywhere in the Democrat-controlled Senate.

Then in April, memos revealed that top White House adviser Valerie Jarrett personally conducted damage control with nervous health insurance companies that said they couldn't hold Obamacare premiums down without a taxpayer-funded bailout. The bailout offer was crucial to obtaining the industry's buy-in for the law back in 2010.

Their pleas to Jarrett worked, apparently. The following month, President Obama'sDepartment of Health and Human Services issued rules that said in the "unlikely event" the pool ran out of money, the secretary was required to make "full payments" to insurers using "other sources of funding."

It doesn't take a genius to figure out what the "other sources of funding" are.

It's yet another page from the Obama central-planning playbook -- achieve political gains by picking marketplace winners and losers; reduce competition; and burden taxpayers with the fallout.

How cynical that the health insurers that Democrats once demonized -- then-House Speaker Nancy Pelosi called them "immoral" and "villains" -- now are full-blown co-conspirators in what could be the biggest corporate-crony scheme in U.S. political history. The bailout provision was crucial to obtaining the industry's buy-in for the law back in 2010.

"Right now, health insurers are pricing their offerings for Obamacare's second year based on the Obama administration's assurances that taxpayers will prevent them from losing money," the study author Graham said. "Removing this guarantee is necessary to ensure that health insurers bear all the business risk of participating in Obamacare."

Obamacare defenders -- yes, some are still holding out hope -- debate whether the risk corridor provisions are, in fact, a "bailout," because taxpayers technically wouldn't be saving insurance companies from bankruptcy. Others point out that the Bush administration structured similar provisions in the Medicare prescription-drug program.

First, as to the definition of a bailout: If the point of the risk corridor provision is to rescue insurers from financial losses incurred by participating in the exchanges, then yes, a "bailout" is exactly what it is.

As for the "Bush did it, too" excuse, there is no comparing the successful Medicare Part D to Obamacare -- which has been a disaster from its behind-closed-doors inception to its botched rollout. The prescription-drug program has worked better than expected at containing costs, which is how insurance companies -- whose profits exceeded their expectations -- are able to cover the $800 million a year gap between inflows and outflows.

Medicare Part D's corridor provision has never cost taxpayers a dime, which is why the program has never garnered much controversy.

If only the same could be said for Obamacare. It will achieve "revenue neutrality" by using taxpayer funds to offset insurer losses.

The majority of Americans never asked for Obamacare. Now that they have it, the majority of them don't like it, based on the latest opinion polls.

No poll has asked Americans if they think it's their job to bail out insurance companies that lose money under Obamacare, but maybe one should. Because without some sort of intervention, that's exactly what may happen.

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(c)2014 The Augusta Chronicle (Augusta, Ga.)

Visit The Augusta Chronicle (Augusta, Ga.) at chronicle.augusta.com

Distributed by MCT Information Services


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Source: Augusta Chronicle (GA)


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