Because of ObamaCare\u2019s mismatched incentive structure, some savvy commentators are warning of an impending, multi-billion dollar bailout of the insurance companies selling health care policies under the law.<\/p>\n
\u201cPre-ObamaCare,\u201d writes Dan McLaughlin<\/a>, \u201cinsurers had to price their policies mainly by reference to market forces (albeit in an already heavily-regulated market)\u2026 Guess wrong and you lost money. But under ObamaCare, consumers no longer have the choice whether or not to buy policies, and insurance companies no longer face any risk of losing money, because they\u2019ve been promised a bailout. Money will still be lost, but it will be taxpayer money, and you never run out of that, do you?\u201d<\/p>\n McLaughlin is talking about ObamaCare\u2019s \u201c3 R\u2019s\u201d \u2013 reinsurance, risk corridors and the risk adjustment program. I\u2019ve written about this multi-year, $20 billion bailout<\/a> before. In different ways, each is designed to subsidize insurers for lost revenue traceable to the health law\u2019s dysfunctional mandates. The threefold scheme was buried in the legislation to buy the support of large insurance companies who would have refused to participate without it.<\/p>\n Now the bill is coming due.<\/p>\n Based on interviews and documents containing discussions between Obama administration officials and insurance industry executives, a House Government Oversight report reveals that insurers are expecting the following payments:<\/p>\n 1)\u00a0\u00a0\u00a0\u00a0\u00a0 $640 million from the Risk Corridor program for the 2014 plan year<\/p>\n 2)\u00a0\u00a0\u00a0\u00a0\u00a0 $346 million from the Risk Adjustment program<\/p>\n The reinsurance program redistributes money among private insurance companies, as determined by the federal government.<\/p>\n The numbers quoted above are two to three times higher than originally anticipated because of the high level of adverse selection \u2013 i.e. too many older and sicker enrollees, not enough younger and healthier ones. The latter group is avoiding enrollment, preferring to pay ObamaCare\u2019s relatively low penalty. But even that is a mirage. Reports are surfacing that as many as 25 million uninsured Americans are getting ObamaCare penalty waivers<\/a> for next year; further increasing the federal budget deficit.<\/p>\n Bailouts can be nice, if they apply to you. But as a governing strategy, they eventually bankrupt the entire system.<\/p>\n","protected":false},"excerpt":{"rendered":" Because of ObamaCare\u2019s mismatched incentive structure, some savvy commentators are warning of an impending, multi-billion dollar bailout of the insurance companies selling health care policies under the law. \u201cPre-ObamaCare,\u201d writes Dan McLaughlin, \u201cinsurers had to price their policies mainly by reference to market forces (albeit in an already heavily-regulated market)\u2026 Guess wrong and you lost […]<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[1132,3308,1829,35,3005,2338],"class_list":["post-21247","post","type-post","status-publish","format-standard","hentry","category-posts","tag-bailout","tag-health","tag-insurance","tag-obamacare","tag-penalty","tag-waiver"],"_links":{"self":[{"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/posts\/21247","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/comments?post=21247"}],"version-history":[{"count":5,"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/posts\/21247\/revisions"}],"predecessor-version":[{"id":21252,"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/posts\/21247\/revisions\/21252"}],"wp:attachment":[{"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/media?parent=21247"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/categories?post=21247"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/cfif.org\/v\/freedom_line_blog\/wp-json\/wp\/v2\/tags?post=21247"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}