Cronyism: White House advisor intervened to expand Obamacare’s health insurance bailout to limit dramatic premium increases

Barack Obama and Valerie Jarrett

The House Oversight and Government Reform Committee has uncovered correspondence between White House advisor Valerie Jarrett and a health insurance company executive after he gave a “heads-up” that the Obamacare bailout wouldn’t be enough to avoid the “unwelcome surprise” of higher than expected premium increases.

Chet Burrell, President and CEO of Care First Blue Cross Blue Shield, reached out to Jarrett on April 4 at 10:20 am to bring the issue to her attention. Katherine Branch, the White House advisor’s assistant, replied less than 30 minutes later to ask if he was available to talk to Jarrett later that afternoon.

Burrell and Jarrett apparently had that little chat. He followed up the next day with a summary of the issue he talked with her about. The document attached in the email expressed concern over the budget neutrality of Obamacare’s “risk corridor” program, known to many as the insurer “bailout.”

The risk corridor program guarantees payments from the from the federal government to insurers if the risk pool isn’t properly balanced with the young and healthy people who are intended to offset the costs of sick and unhealthy consumers. The payments come from a fund into which insurers contribute, and it was originally scored as budget-neutral, meaning that there wouldn’t be any cost to taxpayers.

Given the unlikelihood of many insurers contributing to the program due to unbalanced risk pools, Burrell suggested that insurance premiums would rise, and spark a negative public reaction, unless the administration was willing to “clarify” (read: provide more funding) the bailout rule.

Jarrett responded later in the day on April 5, telling Burrell that “the policy team is aggressively exploring options” to ease insurers’ concerns. After nearly a week, on April 11, Jarrett told Burrell that a bulletin had been issued. He replied that the White House “has to be prepared for large premium rate increases in many parts of the country because a key stabilizer (risk corridors) can now not be counted on.”

The Obama administration, in May, expanded the Obamacare bailout, outside of its original budget-neutral projection. Though the Congressional Budget Office projected in February that this provision would generate revenue, the House Oversight and Government Reform Committee, in a report released yesterday, estimated that the risk corridor program will cost taxpayers more than $725 million this year.

The Committee also found that 12 of the 15 traditional insurance companies it surveyed expect to receive money from the bailout program this year, while just one expects to make payments. Two insurers, the report says, don’t expect to make payments to or receive anything from the program. Several insurance co-ops expect payments from the program as well, though most don’t expect to make or receive payments.

Coupled with Obamacare’s risk adjustment program, which transfers money from plans with more balanced risk pools to those with unbalanced polls, the bailout to health insurance companies is going to come very close to $1 billion.

Despite the populist arguments made by President Barack Obama and Democrats, Obamacare is proof that corporate welfare and the culture of cronyism is alive and well in this administration. But you already knew that.

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