Get Ready to Bail Out The Insurers

“On Friday, the Obama administration issued a new rule that will likely lead the government to give billions of taxpayer dollars to health insurance companies involved in the ObamaCare health exchanges. The rule is part of an effort by the Centers for Medicare and Medicaid Services to address fears that under ObamaCare, insurance companies will suffer huge losses because the cost for care of the high numbers of sick enrollees will not be offset by payments from healthy enrollees — because not enough healthy enrollees are signing up for ObamaCare.

Townhall reported last December, “A ‘risk corridor’ provision in Obamacare allows the federal government to give health insurers a taxpayer bailout if the cost of providing care for those insured through Obamacare is higher than insurers originally estimated when they first set premium prices.”

Such a program was created to help prevent insurance companies from raising costs to extremely high rates resulting from a more risky population of people joining the new exchanges.

The Obama administration has assured Americans that the risk corridor program would not cost taxpayers anything. The Daily Caller wrote, “CMS has issued guidance in the past promising that if the money collected from successful insurers wasn’t enough to cover all the payments due to the struggling ones, payments would be reduced and shortfalls made up for the following year.”

But insurance companies asserted that the rules fail to consider that some insurers may take even bigger hits than anticipated. America’s Health Insurance Plans addressed these concerns to CMS in April, explaining that minimizing the risk-aversion program could ultimately lead to higher premium rates. As a result, CMS is now moving away from its budget-neutral promise, citing worries from “some commentators.”

“We appreciate that some commenters believe that there are uncertainties associated with rate setting, given their concerns that risk corridors collections may not be sufficient to fully fund risk corridors payments,” the rule reads. “In the unlikely event of a shortfall for the 2015 program year … HHS will use other sources of funding for the risk corridors payments, subject to the availability of appropriations.”

To alleviate insurance companies’ concerns over ObamaCare losses, federal regulations originally allowed insurers access to bailout funds after they spend $60,000 on an individual, but in December, the Department of Health and Human Services introduced new regulations lowering the limit to $45,000.

The Department of Health and Human Services has the power to use taxpayer money to reimburse insurance companies up to 80 percent of their additional cost in the first three years of the law’s existence. Americans for Prosperity’s website explained, “If the cost of insuring individuals under the PPACA is 3% higher than estimated, insurance companies receive a 50% taxpayer reimbursement of the difference. If the cost of the ACA is 8% higher than estimated, which is a significantly more likely outcome, insurance companies receive an 80% taxpayer reimbursement. This bailout of insurance companies could end up costing taxpayers billions of dollars.”

In a notice published on December 2 in the Federal Register, the Obama administration acknowledges that insurers have valid concerns when they observe that they may be saddled with sicker customers that cost more money in the new insurance exchanges because healthier Americans will likely be staying on their existing health plans for another year….”

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