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Friday
Aug012014

ObamaCare's $11 Billion Bailout (At Least)

That the Obama Administration has been a bevy of crony capitalism is well established, and ObamaCare is no exception.  A recent report from the House Committee on Government Oversight and Reform exposes the rather cozy relationship between various White House advisors, especially uber-advisor Valerie Jarrett, and the CEOs of large insurance companies and how both sides benefitted from expanding the bailout for insurers.  For a good summary on that, go here.

I just want to take a moment to examine how much the insurance industry bailout will cost taxpayers this year. There are three bailout provisions in ObamaCare: the risk corridors, risk adjustments, and reinsurance.

ObamaCare’s risk corridors are a temporary program that is supposed to help insurers mitigate the enormous amount of risk inherent in the ObamaCare exchanges.  Under this program, an insurer in the exchange whose costs make a profit share some of those profits with insurers who incur losses. The problem occurs if there are not enough insurers who are “winners” to help fund the “losers.”  If there are many more losers than winners, the federal government the taxpayers step in and pay the costs of the losers.  And that looks to be a very real problem.  The committee report states that the insurers “expect Risk Corridor payments of about $725 million directly from taxpayers in 2014.” However, not all insures gave the committee estimate on what they expected from the risk corridors. “Extrapolating these estimates for the entire population enrolled in ObamaCare-compliant exchange plans means that taxpayers may be on the hook for upwards of $1 billion in 2014 alone.”

The risk adjustment programs takes money from insurers with healthier pools of customers and gives it to insurers with sicker pools.  The problem occurs if there are not enough insurers with healthy pools to cover those with sick pools.  In that case, the taxpayers step in to help the insurers with sicker pools.  (Notice a pattern?) The reports states, “As of May 2014, the companies surveyed by the Committee expect net payments through the Risk Adjustment program of about $346 million.”

Finally, ObamaCare’s reinsurance program is “funded by a fee on nearly all people with health insurance [and] subsidizes expensive medical claims of individuals enrolled in ObamaCare-compliant plans. The amount of the Reinsurance program bailout was set by statute and equals $10 billion in 2014, $6 billion in 2015, and $4 billion in 2016.” Here’s betting that the government finds a way to spend that entire $10 billion.

By my math that is about $11.3 billion.  But this is only August.  This could easily reach $12 billion by the end of the year.

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