Obama Administration Secures Bailout For Obamacare Insurers

Insurance companies who’ve been repeatedly told – at least in public – that there’s no reason they should need government assistance to ensure the Obamacare era is a profitable one now have a taxpayer-funded bailout waiting for them if the Affordable Care Act’s provisions cause them to lose money.

The Los Angeles Times reported today on a set of new regulations quietly issued last week that effectively guarantee insurance companies a safety net if they can’t make a profit selling Obamacare.

“Administration officials for months have denied charges by opponents that they plan a ‘bailout’ for insurance companies providing coverage under the healthcare law,” wrote Noam Levy for the Times. “They continue to argue that most insurers shouldn’t need to substantially increase premiums because safeguards in the healthcare law will protect them over the next several years.

“But the change in regulations essentially provides insurers with another backup: If they keep rate increases modest over the next couple of years but lose money, the administration will tap federal funds as needed to cover shortfalls.”

We previewed these proposed regulations not long after Obamacare launched, so today’s news isn’t “new” – it just represents the point of no return for the Obamacare provision known as “temporary risk corridors” to become a part of the overall law.

Risk corridors represent a mechanism intended to correct miscalculations in the insurance industry’s ability to anticipate pricing risk when it sets policy rates for a given year. In other words, they’re a margin-of-error safety net to help the industry have some wiggle room if it doesn’t correctly predict what its coverage risks will be at the time it commits itself to a schedule of fixed prices.

But they’re certainly not designed to function as a means of correcting the government’s politically-driven (and probably foreknown) miscalculation of risk. The Obama Administration – along with anyone else who’s been paying attention – has known since last year that the economics of Obamacare are upside down; that the young and healthy demographic must enroll in sufficient numbers if the entire system is to recover costs and return a profit to insurers.

Little has changed since last November.

“This system was supposed to pay for itself, as does a similar one used to shift money between drug plans in the Medicare Part D program,” the Times observed. “But insurance industry officials have grown increasingly anxious about the new system’s adequacy.”

The risk corridors trick is a complex one, and, because Obamacare is in its first year, no one’s been bailed out yet. But the means to do so, with government money, are now in place.

by Ben Bullard, personalliberty.com