Among the foremost threats to individual freedom in America is the abusive and oftentimes lawless behavior…
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More Legal Shenanigans from the Biden Administration’s Department of Education

Among the foremost threats to individual freedom in America is the abusive and oftentimes lawless behavior of federal administrative agencies, whose vast armies of overpaid bureaucrats remain unaccountable for their excesses.

Among the most familiar examples of that bureaucratic abuse is the Department of Education (DOE).  Recall, for instance, the United States Supreme Court’s humiliating rebuke last year of the Biden DOE’s effort to shift hundreds of billions of dollars of student debt from the people who actually owed them onto the backs of American taxpayers.

Even now, despite that rebuke, the Biden DOE launched an alternative scheme last month in an end-around effort to achieve that same result.

Well, the Biden DOE is now attempting to shift tens of millions of dollars of…[more]

March 19, 2024 • 08:35 AM

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How ObamaCare’s Insurance Bailouts Add Up to Crony Capitalism Print
By Ashton Ellis
Wednesday, January 29 2014
The reason for all this convoluted money funneling is to entice health insurance companies to participate in ObamaCare long enough for the law to become entrenched.

Looking back on the first four months of ObamaCare – an error-prone rollout for Healthcare.gov, adverse selection in state-run risk pools and a last-minute rule change by federal regulators to allow consumers to keep non-complying plans – it’s a wonder that the health insurance industry ever signed off on ObamaCare in the first place. 

But not if you know how well insurance companies insulated themselves from financial ruin by passing the buck to taxpayers.

Now, with it looking like enrollments in ObamaCare’s government-run exchanges will tilt heavily toward high-cost subscribers, insurance companies in the individual market are poised to reap the rewards of several little known programs designed to bail them out. Each protects participating insurance companies from losing money, so that the Obama administration can claim credit for success that isn’t merited.

Here’s how the coming ObamaCare bailout will work:

  1. Risk Adjustment – This is essentially a wealth transfer among all health insurance companies, whether inside or outside the exchanges. One of the big fears prior to ObamaCare was that the rules required to participate – such as guaranteed issue and no pricing based on preexisting conditions, age or lifestyle – would lead to adverse selection: too many old and sick people buying insurance without enough young and healthy people to pay for them. ObamaCare’s risk adjustment provision minimizes this financially disastrous result by forcibly transferring money from plans with healthier populations to those with sicker ones.

  2. Reinsurance – This is also a wealth transfer. In effect, this program shields insurance companies in the individual market from having to pay the real cost for covering their subscribers. This program amounts to an implied admission by the Obama administration that, as implemented, ObamaCare – even after “risk adjustment” – is not a financially sustainable business model for private insurance companies.

  3. Risk Corridors – Whereas reinsurance subsidizes the costs of coverage, risk corridors subsidize the losses. If the actual cost of insuring subscribers exceeds 3 percent of what the insurer expected, federal taxpayers reimburse 50 percent of the losses. If the actual cost exceeds 8 percent of what the insurer expected, federal taxpayers pick up 80 percent. (The reverse is true for profits.) Overall, the idea is to use these backdoor bailouts as a way to convince participating insurance companies not to raise premiums for the next few years, as they otherwise would if the price of the plan had to pay for the actual cost of coverage.

  4. Individual Mandate – Supporters of the ‘3Rs’ as they are known in the health insurance industry dismiss criticism by noting that two of the three – reinsurance and risk corridors – will phase out in 2016. But what they don’t say is why. Only in 2016 will the penalty for not complying with ObamaCare’s individual mandate reach its full height, going from the greater of $95 or 1 percent of taxable income in 2014 to the greater of $695 or 2.5 percent of taxable income in 2016. Of course, by 2016 the individual health insurance market outside of ObamaCare will be effectively dead since federal subsidies cannot be used to pay for plans bought outside the exchanges. There is also the probability that millions of workers currently covered by their employer will be forced onto an ObamaCare exchange as the one-year delay of the employer mandate sunsets in October 2014. So while it’s true that reinsurance and risk corridors are only temporary bailouts, it’s only because they will be quickly replaced by a more permanent wealth redistribution scheme underwritten by taxpayers. 

The reason for all this convoluted money funneling is to entice health insurance companies to participate in ObamaCare long enough for the law to become entrenched. By guaranteeing to minimize the costs and losses associated with the law, the Obama administration has bought the insurance industry’s silence in the form of stable premiums (at least for now).

In the end, however, ObamaCare’s participating insurance companies look destined for disappointment. It is no coincidence that the subsidies stop flowing during the last year of President Barack Obama’s term in office. When that happens, expect insurers to discover that their sweetheart deal will expire, and they’ll be left to bear much more of the costs and losses ObamaCare imposes.

After all, that’s the price to pay once the cronies leave office.

Notable Quote   
 
"Americans do not trust several major U.S. institutions, including the national news media.The recently released Center Square Voters' Voice poll found that 43% of Americans say the media is trustworthy, compared with 54% who said it is not trustworthy.Younger people were more likely to trust the media, with 47% of those ages 18-34 saying they trust it and 46% saying the opposite.The numbers steadily…[more]
 
 
— Casey Harper, The Center Square
 
Liberty Poll   

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