Wednesday, December 9, 2015

What if Health Insurer Industry Collapses?

You see, of course, if you’re not a dunce,

How it went to pieces all at once,

All at once and nothing first –

Just as bubbles do when they burst.

Oliver Wendell Holmes (1809-1894), The Deacon’s Masterpiece

Two media reports today have enormous and ominous implications for ObamaCare.

One, “ Congress Must Stop the Flow of Corporate Welfare to Insurers,” Real Clear Health, December 8, by Doug Badger, Senior Fellow at Galen Institute and former White House and U.S. Senate Policy Advisor.

“Marco Rubio Quietly Undermines Affordable Care Act,” New York Times, December 9, by Robert Pear, Times senior reporter on health affairs.

Although one report comes from a conservative source, Galen Institute, and other from a liberal source, New York Times, both say the same thing.

ObamaCare rests on a foundation of government support for health insurers, i.e. a "bailout" - should insurers lose too much money from insuring consumers enrolling in programs or consumers facing hefty premium increases outside these programs.

Badger opens:

“This could be a very merry Christmas for Blue Cross and Blue Shield (BCBS) of Texas. The Obama administration wants to stuff its stocking with $257,172,917.34 – at your expense – to compensate the company for losing scads of money last year selling Obamacare policies in the Lone Star State.That would bring that single company’s total corporate welfare haul for the 2014 plan year to $843.3 million. That is, unless Congress decides this week to play the Grinch that stole the corporate welfare Christmas.”

and concludes:

“Many insurance companies are bleeding money on their ObamaCare products. The administration wants to make their losses your problem, declaring them an 'obligation of the United States government for which full payment is required.' They insist that you are legally bound to bail out some very big corporations that made some very bad business decisions. Congress last year quashed these corporate welfare payments. This week they will decide whether to capitulate to the White House and let the bailout money flow. Congress should stand firm, even if it means a less than merry Christmas for the insurance industry.”

Robert Pear opens:

“A little-noticed health care provision that Senator Marco Rubio of Florida slipped into a giant spending law last year has tangled up the Obama administration, sent tremors through health insurance markets and rattled confidence in the durability of President Obama’s signature health law.”

and concludes:

“Insurers were shocked by the sudden change. They had set 2014 premiums on the assumption that healthy people with old insurance policies would move into the new marketplace, but Mr. Obama allowed many of them to stay out. In a letter to state insurance commissioners in November 2013, the administration said 'the risk corridor program should help ameliorate unanticipated changes in premium revenue.' ”

"Rubio has introduced his bill to kill the risk corridor program. Insurers now are lobbying to get more of the money they say they were promised, or to get relief in some other form."

“Clare Krusing, a spokeswoman for the insurance group, said the federal payments were not a bailout for the industry, but a way of stabilizing the market and thus protecting consumers. 'When health plans cannot rely on the government to meet its obligations,' she said, 'individuals and families are harmed.' ”

That the insurance market is unstable, few no longer doubt. Of the 23 health co-ops to which consumers could turn, 11 have collapsed, leaving 700,000 consumers stranded without plans, and many of the other 12 co-ops are in financial jeopardy. UnitedHealth has announced it may pull out of exchanges in 2017.

Suddenly the terms “risk corridors,” “federal bailouts,” “corporate welfare,” “crony capitalism,” and “ObamaCare death spiral,” come into sharper focus.

The ObamaCare domestic political masterpiece may suddenly be at risk of sudden collapse.

ACA provisions leading up to this state of affairs have become clear: As of January 1, 2014, insurers were no longer able to deny coverage or charge higher premiums based on pre-existing conditions . These aspects of the Affordable Care Act (ACA) – along with tax credits for low and middle income people buying insurance on their own in new health insurance marketplaces – were designed to make it easier for people with pre-existing conditions to gain insurance coverage.

These provisions led to unintended consequences for the insurance market: insurers taking heavy losses from those previously considered “uninsurable, ” i.e., sicker enrollees leading to unaffordable premium hikes

Three provisions of the ACA – risk adjustment, reinsurance, and risk corridors – were intended to promote insurance market stability, particularly in the early years of reform.

Well, five years after passage of the ACA, the early years of reform are over, and Obama Care best laid schemes may be coming to naught because losses exceed risks, and the government may not be able to deliver on its promises of protecting its corporate partners, insurers, from risks inherent in insurance markets.

The corridor of risk for health insurers may soon be closed, and with that closure, could come ObamaCare's collapse.

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