risk corridors

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.
[…]
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.

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.
[…]
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.”

Yes, Jay Carney, Obamacare is a government program

Facing questions from reporters on Monday about Obamacare enrollments, White House Press Secretary Jay Carney defended the administration’s inability to come up with the number of paid premiums. But there was one particular part of his comments that stood out.

“We are talking about private insurance. This is not a government program,” Carney told reporters. “The contract that you sign if you get health insurance through Healthcare.gov or through a state marketplace is a private contract between you and an insurance company.”

PolitiFact named statements that Obamacare is “a government takeover of healthcare” as its “Lie of the Year” for 2010. The fact checker, however, only examined the statement through the most basic lens.

“‘Government takeover’ conjures a European approach where the government owns the hospitals and the doctors are public employees,” Bill Adair and Angie Drobnic Holan wrote in December 2010. “But the law Congress passed, parts of which have already gone into effect, relies largely on the free market.”

It’s true that the Obamacare relies on private insurance companies participation in the state and federal exchanges. It’s also true that enrollees are entering into private contracts with insurers for coverage. But that doesn’t mean that Obamacare isn’t a government program.

Individual mandate: In a true free market, individuals decide for themselves if a product or service best suites their needs. Taking the politically convenient loopholes out of the equation, the individual mandate exists to coerce Americans into purchasing health plans.

Obama’s budget requests $5.5 billion for insurer bailout

Buried inside President Barack Obama’s hideous budget proposal is a request for $5.5 billion to pay for the bailout for health insurance companies in the increasingly likely event that they lose money on Obamacare:

Health insurers such as WellPoint Inc. and Humana Inc. stand to gain $5.5 billion next year to cover losses from Obamacare in a program the law’s opponents label a bailout.

The money, outlined in President Barack Obama’s proposed budget for the fiscal year that begins in October, is designated to help insurers who find the cost of the law higher than expected, based on the percentage of older, sicker people who sign up compared with younger enrollees.

Under the Patient Protection and Affordable Care Act, insurers who record a profit of 3 percent or more on their Obamacare business would put some of the gains into a government-controlled fund. Companies whose claims cost at least 3 percent more than their premium revenue can access the money.

There are a couple different reasons why insurers are likely to use the risk corridors provision, mainly because of unexpected regulatory changes that are likely to reduce projected enrollments and the number of young and health people signing up for coverage hasn’t met expectations.

Administration considers another illegal Obamacare change

Two weeks after the Obama administration unilaterally delayed enforcement of the employer mandate until 2016, the Washington Examiner reports that discussions are underway to extend Obamacare’s “risk corridors” provision to ease concerns being expressed by uneasy insurers:

“The Obama Administration may extend beyond 2016 a federal reimbursement program for health insurance companies that lose money by participating in the newly created health care exchanges,” reports Susan Ferrechio. “Industry insiders told the Washington Examiner a plan to extend the Affordable Care Act’s ‘risk corridors’ are under discussion, but that administration officials have not made a final decision.”

The risk corridors provision — one of the “three “Rs” of Obamacare — 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 revenue-neutral, meaning that there wouldn’t be any cost to taxpayers.

Obama considering extension of administrative fix

When the political firestorm over the millions of health policy cancellations became too much of a problem for Democrats to ignore, President Obama, who told Americans they could keep their plans, pushed an “administrative fix” that would allow insurers to voluntarily extend policies for one more year.

But with control of the Senate on the line, it appears that the administration is kicking around the idea of extending plans that would otherwise be outlawed by Obamacare narrowly written regulations for three more years:

The Obama administration is considering an extension of the president’s decision to let people keep their individual insurance policies even if they are not compliant with the health care overhaul, industry and government officials said Thursday.

Avalere Health CEO Dan Mendelson said Thursday that the administration may let policyholders keep that coverage for as long as an additional three years, stressing that no decision has been made. Policymakers are waiting to see what rate hikes health insurers plan for the insurance exchanges that are key to the overhaul’s coverage expansions.
[…]
Health and Human Services spokesman Joanne Peters confirmed that the issue is under discussion, saying: “We are continuing to examine all sorts of ways to provide consumers with more choices and to smooth the transition as we implement the law. No decisions have been made.”

Today in Liberty: Amash wants to avoid debt ceiling theater, anti-NSA bill moves in Arizona

“What is ominous is the ease with which some people go from saying that they don’t like something to saying that the government should forbid it. When you go down that road, don’t expect freedom to survive very long.” — Thomas Sowell

— Conservatives urge Boehner forego “theater” on debt ceiling: Reps. Justin Amash (R-MI) and Raul Labrador (R-ID), two of the most conservative members of the House, are urging Speaker John Boehner (R-OH) avoid political theater and pass a clean debt ceiling rather than delay the inevitable. “Our constituents are fed up with the political theater. If we’re not going to fight for something specific, we might as well let the Democrats own it,” said Labrador. Amash was more resigned to the ends of a showdown, saying, “It’s going to end up being clean anyway.”

— Oh, Chris Matthews, you are such a pitiful person: The MSNBC host says that complaining about President Obama’s use of executive power and lawlessness is “second-term birtherism.” Make fun of birthers all you want, we don’t mind. But the constitutional limits on the executive and separation of powers is not something that should be so easily tossed aside. No word on whether Matthews still gets a thrill up his leg when he hears Obama speak.

Lax youth enrollment could bring Obamacare bailout

Now that the Department of Health and Human Services (HHS) had shed some light on the low percentage young people who are selecting health plans through the Obamacare exchanges, worries of a taxpayer-funded bailout for the insurance industry have become more real.

Through the first three months of open enrollment, just 24% of Obamacare signups were from 18 to 34 year-olds, meaning that enrollees are older and, likely, sicker. The Obama Administration had anticipated that nearly 40% of enrollees would be in this age group, a necessity if the math behind the law is to work.

Insurers could react to the disproportionate risk pool by increasing premiums for plans available on the exchanges in 2015. But it could also mean that taxpayers will bear the costs of their losses this year, thanks to two provisions buried in Obamacare.

While it hasn’t received a lot of attention in the media, the “risk corridors” provision of Obamacare guarantees payments from the from the federal government to insurers for losses incurred. That could be a big problem for taxpayers if young people don’t enroll in droves in the final three months of the open enrollment period.

“This is an unlimited taxpayer liability that compensates insurers in the exchanges for medical costs in excess of 103 percent of the target costs for each plan,” wrote John R. Graham of the National Center for Policy Analysis in November. “For costs between 103 percent and 108 percent of target, taxpayers compensate the insurers half the excess loss.”

Yeah, about those Obamacare enrollment demographics…it’s bad, real bad

While the Obama Administration has been silent on the age demographics of Obamacare enrollees, a Reuters analysis of a handful state-based exchanges shows that not nearly enough young and healthy people are signing up to offset the costs of the sick and elderly who have sought coverage (emphasis added):

Now that more than 2 million people have signed up for private insurance plans created by President Barack Obama’s healthcare law, a crucial next check-up for the new marketplace will be to see how old customers are.

Early data from a handful of state exchanges shows the administration needs more young adults to sign up in the next three months to help offset costs from older enrollees and prevent insurers from raising their rates.
[…]
Data from seven states and the District of Columbia, which are running their own marketplaces, show that of more than 200,000 enrollees, nearly 22 percent are 18 to 34 years old, according to a Reuters analysis.

The administration had hoped that over 38 percent, or 2.7 million, of all enrollees in 2014 would be 18 to 35 years old, based on a Congressional Budget Office estimate that 7 million people would sign up by the end of March.

Just last week, Humana — one of the insurers participating in the Obamacare exchanges — noted that the enrollment mix was “more adverse than previously expected.” This could mean that insurers will be forced to adjust by raising premiums for plans available to consumers for 2015.


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