By Thomas Lifson
One critical element in selling the Obamacare legislation to the Democrats, who passed it into law without a single Republican
vote, was the lobbying of the health insurance industry. The insurers were made into cronies by the inclusion of the so-called “risk corridor” payments, guaranteeing them profits should premium revenue fail to cover expenses.
The deal was thus presented to them as a no-lose proposition that would expand the market for their products by forcing consumers to buy them on pain of hefty fines (later redefined as “taxes” by Chief Justice Roberts). Big Health Insurance mobilized its lobbying might in favor of Obamacare, and it passed (unlike HillaryCare, which the insurance industry was able to kill with its devastating “Harry and Louise” television ads.
But alas, Marco Rubio inserted a provision “in last year's spending bill that limited the program, requiring HHS to pay out only from the pool of money collected, rather than supplementing it with other sources of government funding. President Obama signed that bill.”
And wouldn’t you know it:
For the 2014 benefit year, insurers losing more than expected asked for $2.87 billion in government payments through the risk corridors program, but HHS only collected $362 million from insurers performing better than expected. Thus, the funds available to the federal government only amounts to 12.6 percent of what insurers argue that they're owed.
As Ed Lasky put it yesterday, this has all but killed Oamacare, with industry giant United Healthcare threatening to leave the Obamacare market, with its large competitors almost soon to follow, unable to sustain multibillion-dollar losses with no prospect of risk corridor payments making up the difference.
Here comes the crony capitalism, as Philip Klein writes in The Examiner:
In a statement issued Thursday, the same day that the nation's largest insurer, UnitedHealth announced it may exit Obamacare due to mounting losses, Tavenner said, "We've been very clear with the administration about the serious challenges facing consumers and health plans in this Exchange market. Most recently, nearly 800,000 Americans have faced coverage disruptions as a result of the significant and unexpected shortfall with the risk corridors program. When health plans cannot rely on the government to meet its obligations, individuals and families are harmed as a result. The administration must act to ensure this program works as intended and consumers are protected."
In an effort to reassure the industry, CMS, the HHS agency Tavenner previously led, issued guidance reiterating that HHS would use money collected from insurers in 2015 and possibly 2016 to make up the $2.5 billion shortfall that exists in 2014.
But what happens if there still isn't enough money, and after 2016, the program is taking in less than the money sought by insurers?
HHS said it, would "explore other sources of funding for risk corridors payments, subject to the availability of appropriations. This includes working with Congress on the necessary funding for outstanding risk corridors payments."