Posted on 01/14/2014 6:46:11 AM PST by SeekAndFind
Among the many legitimate criticisms of the 2008–09 Wall Street bailout was that it created a situation in which profits are private but losses are public, being borne by taxpayers who extended liberal loans and outright subsidies to various firms in order to head off total paralysis in the credit markets. Critics right and left regarded the combination of private profits and public losses as inherently objectionable — but Barack Obama and congressional Democrats apparently saw in the Wall Street bailout a model for health-insurance reform. And, surprise: Buried deep within the Affordable Care Act are not one but two provisions to provide preemptive bailouts to insurance companies in the event that their finances should be overwhelmed by unanticipated circumstances — for example, a catastrophically incompetent rollout of the program that left them overburdened with high-cost sick and elderly clients. This is one of the many distasteful results of Nancy Pelosi’s pass-it-to-find-out-what’s-in-it style of legislation.
The bailout provisions of Obamacare are found in Sections 1341 and 1342 of the Affordable Care Act, both of which should be repealed. Doing so will be difficult, but it is not impossible. The first provision bails out insurance companies for costs associated with individual patients when they exceed $45,000. Under this so-called reinsurance program, insurers will be able to push off 80 percent of costs between $45,000 and $250,000 onto a fund financed by a fee of $63 per head on customers of insurance companies and workers covered by self-insuring companies. Given that most of the associated costs will almost certainly be passed on to consumers by insurers, that fee is in effect a tax. And in the event that the fund does not generate revenue sufficient to cover its costs — far from an unlikely scenario — then taxpayers will be explicitly on the hook. This preemptive bailout was included in the law as a deal-sweetener to induce more insurance companies to participate in the program. It is a good deal for insurers, for whom any opportunity to reassign risk to somebody else is a welcome profit opportunity, but it is a terrible deal for consumers and taxpayers.
The second and potentially even more troubling bailout provision is the one for so-called risk corridors, which asks the insurance company to project their total costs and then picks up most of the difference if losses should exceed those targets. The potential for gaming the system here is obvious and dire, and the potential costs are enormous. Senator Marco Rubio already has introduced a bill to repeal this provision, though it is unlikely to pass. At the very least, Republicans should ensure that the provision, scheduled for sunsetting in 2016, dies on schedule.
The potential costs and risks associated with these provisions are worrisome, and the fact that they are in effect hidden from the public is troubling in and of itself. The complexity of Obamacare is by design: By obscuring the realities of the program, Obamacare’s architects ensured that it would be easier to peddle such untruths as “If you like your insurance, you can keep it” and promises of substantially lower premiums. The reality of Obamacare has shocked Americans, but it has not shocked them enough: Even as the law sends many Americans’ insurance premiums skyrocketing, those higher premiums do not cover the costs associated with the program — Americans will be paying on the front end and on the back end as well, with premiums on one side of the equation and bailouts on the other.
If Congress had tried to pass a law simply transferring $1 trillion to insurance companies over the next decade, there would have been energetic resistance to its doing so. The Affordable Care Act amounts to the same transfer, even as it places insurers in the enviable position of having a federal law in place that gives Americans a choice between buying their products and being fined by the federal government.
Unlike the Wall Street bailouts, the insurance bailouts are not a one-time expedient instituted in the face of a crisis: They represent an open-ended claim on taxpayers’ resources and a transfer of risk from private, profit-seeking enterprises onto the government. Together, the provisions represent an important part of the Democrats’ agenda for transforming what we know as insurance companies into semi-public utilities managed by central planners in Washington. There are obstacles to seeing these provisions repealed: Harry Reid’s Senate stands in the way, as does President Obama. But every new revelation about the real costs and burdens of this program render it more vulnerable, and it will be difficult and costly for Democrats to defend a permanent bailout regime. It is a fight worth having — and if that fight should continue into November, the American public should be invited to take the opportunity to weigh in on whether it wishes to be permanently committed to future bailouts of large financial firms that use political favoritism to pass off their losses. We suspect that many Americans will find themselves quoting John Boehner, whether they realize it or not: Hell, no.
The insurance companies were all in for Obamacare. Let’s not make them out to be complete victims. They were counting on all the mandated business. What they didn’t count on was being lied to by the government.
No sympathy here from me. Sorry.
They were counting on this being like the auto insurance industry. Government mandate means greater profits. Not going to work out like that for them.
Government intended to destroy private health insurance all along. It’s the only real way to effectively implement single payer in this country. Well on their way to that too. IF (big if) insurance companies get bailed out it will still be the same thing. Just filtered through a complicit non government billing system.
Thanks for your forbearance. :)
Agree with you. There will likely be a series of “fixes and adjustments” made along the way, but they probably will never repeal it because there’s a lot of money being made beneath the surface.
Fundamentally, at its core, Washington DC is all about money. All the talk of highminded principles is just verbal camouflauge and misdirection.
Are there Chinese Insurance companies?
Democrats will never get rid of the bailout since it would put their legislation at risk. Ideology always trumps reality.
I tend to disagree with the people who think this was all masterminded as an intentional pathway to single payer. Big Ins isn’t dumb enough to sign onto something that guarantees their death.
I don’t see how its fixable at this point. I am imagining a disaster when the employers all cancel their plans at the same time later this year. There’s not enough staff in the world at the insurers to handle that kind of mass transfer.
RE: Are there Chinese Insurance companies?
Life and Property Casualty Insurance? Absolutely.
Healthcare? Not sure.
One Chinese Insurance Company is even listed in the NYSE.
See this SYMBOL: LFC
You’re right. I guess they just figure there’s an unlimited amount of money to throw at it.
Big (health) Insurance was counting on the increased profits from a guaranteed mandated income stream. Like auto insurance. Nestled on top of the guaranteed government bailouts and subsidies.
(un)Surprisingly it’s not like that at all.
Government’s goal all along was to eliminate the private competition for what they view as their purview. If I had to bet, I’d bet on big Government to win this one. I’m a cynical sort though. I’d love to be wrong about this.
OK. I’ll try to get up to speed.
Big Ins isn’t dumb enough to sign onto something that guarantees their death.
*********
Agree, Big Ins is a ‘partner’ with Big Gov.
The supporting systems underlying Obamacare are exceedingly complex with myriad interfaces. It remains to be seen if the system can cope with the massive complexity and security challenges. I’m not convinced that the system will be able to handle it.
Time to write (AGAIN) and raise hell with the appropriate contacts on the Hill.
It’s interesting to me that not all of the big insurers jumped into the exchanges head first. I’d love to know what the CEO of Cigna thinks about the whole thing. Did Cigna stay out with the anticipation of a huge fail? The promise of a bailout was not enough to lure them all in, unless there is a behind the scenes promise of future payouts. Like maybe Cigna will get a huge batch of ex-employer insured customers later in the year.
There was another big one who I noticed did not set up exchange plans. I want to guess Unitedhealth but I can’t remember now.
I have no doubt that next year we will see a new QE whatever to bail out the private insurance industry.
Cashing their checks from the Insurance Lobbyists.
And we have the main reason no GOPe want obamacare repealed. They’re counting on some of these subsidy monies ending up in their own personal bank accounts.
This all makes me so sick. They ALL knew about this - and We the little People are having to fund it.
No, I’ve noticed. It never ceases to amaze me how 535 people get to make these decisions...for the entire country with out any financial obligation/sacrifice, to them, at all. All they do is rake in the paybacks attached to said bail-outs.
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