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Tax-Payer Funded Bailouts for Health Insurance Companies?

November 20, 2013 By Richard C. Young

Senator Marco Rubio (R-FL) discusses a planned bailout for insurance companies here in The Wall Street Journal. Rubio correctly states that Americans shouldn’t be put on the hook for the administration’s failure to execute its own legislation.

Under ObamaCare, abysmal enrollment numbers so far are a warning sign that this law will cost the American people more—and in more ways—than they ever imagined.

One of these ways was exposed last week after President Obama announced his unilateral action to “fix” his broken promise that Americans could keep their existing plans: a bailout of health-insurance companies.

Buried deep in the Department of Health and Human Services’ press release that accompanied the president’s Nov. 14 speech was this sentence: “Though this transitional policy was not anticipated by health insurance issuers when setting rates for 2014, the risk corridor program should help ameliorate unanticipated changes in premium revenue. We intend to explore ways to modify the risk corridor program final rules to provide additional assistance.”

Risk corridors are generally used to mitigate an insurer’s pricing risk. Under ObamaCare, risk corridors were established for the law’s first three years as a safety-net for insurers who experience financial losses. While risk corridors can protect taxpayers when they are budget-neutral, ObamaCare’s risk corridors are designed in such an open-ended manner that the president’s action now exposes taxpayers to a bailout of the health-insurance industry if and when the law fails.

Subsequent regulatory rulings have made clear that the administration views this risk-corridor authority as a blank check, requiring no further consultation or approval by Congress. A final rule handed down in March by HHS and the Centers for Medicare and Medicaid Services states: “Regardless of the balance of payments and receipts, HHS will remit payments as required under section 1342 of the Affordable Care Act.”

On Nov. 14, the American Academy of Actuaries issued a press release saying that President Obama’s plan to reverse health-insurance cancellations “could lead to negative consequences for consumers, health insurers, and the federal government.” More specifically, the academy said, “Costs to the federal government could increase as higher-than-expected average medical claims are more likely to trigger risk corridor payments.”

It is a damning indictment of ObamaCare’s viability when the president’s only response to people losing their health insurance plans entails putting them on the hook for bailing out insurance companies. The American people are already being directly hurt by ObamaCare’s early failures, and it is unconscionable that they be expected to bail out companies when more failures emerge.

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Richard C. Young
Richard C. Young is the editor of Young's World Money Forecast, and a contributing editor to both Richardcyoung.com and Youngresearch.com.
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