I’ll try to make this somewhat complicated event easy to understand. Insurance companies submit estimates for insurance costs (payouts) in to the federal government. If the payouts exceed 103 percent of the estimate, the taxpayers cut a check to insurance companies for 50 percent of the loss. 108 percent equals an 80 percent bailout.
That’s it in a nutshell. We’re still finding out what’s in the rules and regulations when it comes to Obamacare! Chris Jacobs over at The Heritage Foundation found this in a letter sent to state insurance regulators today. My emphasis.
Though this transitional policy [Obama's whim] 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.
Just what is a risk corridor program? Well, that’s something Republicans have been trying to strip from the Obamacare legislation. From the Washington Examiner this morning.
Obamacare includes a provision that allows the federal government to funnel taxpayer dollars to insurers that face the prospect of losing too much money under the new health care law, and conservative critics want to repeal it.
Sen. Marco Rubio, R-Fla., said the provision could amount to a bailout of the insurance industry, which stands to lose if the troubled Obamacare exchanges fail to enroll enough people to make the system financially viable.
OK, so what are the details of the risk corridor program and the bailout provision?
… there are deep-in-the-weeds protections baked into the Affordable Care Act: risk adjustment, reinsurance, and risk corridors.
These programs—collectively called the “three Rs”—aid insurers if they wind up enrolling a population that is sicker and more expensive than projected. …
As I mentioned in the first paragraph, health insurance companies submitted payout estimates for 2014 based on what the law was, expected costs and their actuarial tables. Of course, now President Obama wants to change the rules overnight – illegally by the way – putting a tremendous burden on health insurance companies to pull a rabbit out of a hat in 30 days. Companies may end up with losses, but if they do, there is a bailout written into Obamacare. Here is the payout table courtesy Adrianna McIntyre at The Incidental Economist, which may have its origins in Table 5 of this document, and even this Connecticut.gov presentation from Slide 36. In other words, it’s not made up…
More from McIntyre.
Basically, today’s worst-case scenario is that HealthCare.gov takes months to fix and the mandate is delayed until 2015, resulting in widespread adverse selection. Insurers wouldn’t recoup all losses, but the risk corridor program provides their bottom line with a substantial buffer. Importantly, it doesn’t need to be budget neutral; if the math demands it, the government can pay out more than it collects through the program.
Now go back to today’s letter and notice the phrase “modify the risk corridor program.” Got that? They figure they can change the rules again and probably increase the amount paid out to insurance companies! Increase the bailout!
There were reasons for health insurance companies to get on board. Who wouldn’t want to be in a business where customers are forced to buy your product by the federal government? But as icing on the cake, they have a convenient bailout built right into it all!
Others writing include AP at Hot Air.