health insurance companies

Surprise! Obamacare’s crony health insurance company bailout could hit $1 billion in 2014

Remember when the Obamacare “risk corridors” bailout program wasn’t going to cost taxpayers anything? Well, that might not be true — surprise! At a House subcommittee hearing yesterday, Rep. Jim Jordan (R-OH) explained that the Obamacare bailout provision for health insurance companies could cost taxpayers as much as $1 billion in 2014:

An ObamaCare revenue-sharing program amounts to a taxpayer bailout of insurance companies, the chairman of a House Oversight subcommittee said Wednesday, adding the bill could run more than $1 billion just in 2014.

Rep. Jim Jordan (R-Ohio), chairman of the Economic Growth, Job Creation and Regulatory Affairs panel, disputed a previous Congressional Budget Office (CBO) report that the risk corridors would cost the government nothing.
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Based on the committee’s own research of 15 traditional insurers and 23 ObamaCare co-op insurers, Jordan said companies expect to get nearly $730 million from the corridor.

“The information provided by the insurers suggests that the total taxpayer bailout could well exceed $1 billion this year alone,” he said.

The “risk corridors” provision — one of the “three “Rs” of Obamacare — guarantees payments 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.

Thanks, Obamacare!: Individual health insurance premiums skyrocketed in California, and young people were the hardest hit

Aetna CEO Mark Bertolini acknowledged this week that Obamacare plans are “really not an affordable product for a lot of people.” He wasn’t kidding. The Los Angeles Times reports that individual health insurance premiums have skyrocketed in California, in some cases doubled, over last year’s rates:

For 2014, consumers purchasing individual policies paid between 22% and 88% more for health insurance than they did last year, depending on age, gender, type of policy and where they lived, [California Insurance Commissioner Dave] Jones said Tuesday.
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For 2014, consumers purchasing individual policies paid between 22% and 88% more for health insurance than they did last year, depending on age, gender, type of policy and where they lived, Jones said Tuesday.

“The rate increase from 2013 to 2014, on average, was significantly higher than rate increases in the past,” Jones said in a news conference in Sacramento.

The hardest-hit were young people, he said. In one region of Los Angeles County, people age 25 paid 52% more for a silver plan than they had for a similar plan the year before, while someone age 55 paid 38% more, according to a report that Jones released Tuesday.

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.

Republicans have a responsibility to take on Barack Obama if he illegally bails out health insurance companies

There could be a legal complication for health insurance companies relying on a bailout from the Obama administration in the (likely) event that they lose money because of Obamacare. Peter Suderman recently explained that Congress hasn’t appropriated any money to pay for this bailout:

Last month, buried in a 435-page regulatory filing from the Centers for Medicaid and Medicaid Services (CMS), the Obama administration attempted to reassure the health insurance industry that, if necessary, federal officials would find money to make payments for Obamacare’s “risk corridors”—the temporary shared-risk financing system built into the health law that has been dubbed a bailout of the health insurance industry.

The regulatory filing reiterated the administration’s position that the program would likely be revenue neutral. But in the event that it’s not, it seemed designed to suggest that insurers shouldn’t worry.
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The complication comes from the final phrase: “subject to the availability of appropriations.”

That could be a problem. Because according to a January memo from the Congressional Research Service (CRS), there do not appear to be appropriations available to make the payments. Although the health law does direct the Secretary of Health and Human Services to make risk corridor payments, the CRS memo explains that the legislation “does not specify a source from which those payments are to be made.”

Colorado may charge insurers a fee to run Obamacare exchange

Of course, as is the case with most regulations and taxes, the fee Colorado officials are reportedly considering to pay for the state’s Obamacare exchange will be passed by health insurance companies to consumers:

A $13 million fee on all Coloradans with health insurance would pay half the operating costs at the state health exchange next year and in 2016 under the newest financial projections.

The proposed fee would affect at least 875,000 people and includes Coloradans who get their insurance through their employers or outside the exchange.
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Exchange managers announced earlier this week that they sold private health plans to 124,000 people through the end of March. People who buy through the exchange will get hit with two fees. They are currently paying a user fee of 1.4 percent and that fee is projected to rise as high as 3 percent by 2017. On top of the user fees, people who buy through the exchange will also pay the fee that exchange managers are calling a “general market health insurer assessment.”


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