Obamacare’s insurance company bailout
On Thursday, Moody’s rating agency downgraded its outlook for the health-insurance industry from stable to negative, blaming ObamaCare. Few will shed any tears for insurance companies — but John Q Public is about to get clobbered again, thanks to a taxpayer bailout of the insurers written into the ObamaCare law.
Section 1342 of the Affordable Care Act forces taxpayers to make insurers whole for most of the losses they incur selling policies on the ObamaCare exchanges through 2016. The bailout is meant to hide the full failure of the president’s signature health law until after the next presidential election.
This provision was under the radar until last fall, when ObamaCare’s first ugly surprise hit many Americans. The law forced insurers to cancel 5 million to 6 million health plans effective Jan. 1 because they didn’t comply with ObamaCare’s one-size- fits all coverage requirements.
The law was designed to do that, but the public outrage moved President Obama to ignore his own law and tell insurers on Nov. 14 that they could keep selling the old plans after all.
The companies complained that the chaos would wind up costing them money — and here’s where the plot thickens. On the same day, Obama health official Gary Cohen announced that the federal government (taxpayers) will offset most losses, citing section 1342. Sweetening what the law already guarantees, the administration pledged to “modify” the bailout’s “final rules to provide additional assistance.”
That’s when Congress finally read Section 1342, which Sen. Marco Rubio (R-Fla.) then dubbed a “dirty little secret.” At a House hearing, Secretary of Health and Human Services Kathleen Sebelius confessed that the administration had never tried to estimate what the guarantee could cost taxpayers.
Ah, how freely government bureaucrats spend other people’s money.
Thursday’s news from Moody’s underscores the likelihood that taxpayers will be socked with bailout costs of unknown proportions unless section 1342 is repealed.
That’s just one reason for repeal. Another is that Section 1342’s purpose is to bamboozle the public and hide ObamaCare’s inevitable failure until health “reform” is entrenched beyond turning back.
Inevitable, because anyone with knowledge of health insurance knew from the start that ObamaCare’s exchanges couldn’t offer affordable insurance. The premiums have to cover a long list of mandatory benefits, as well as $100 billion in taxes that the law imposes on insurers over the decade.
Most significantly, the premiums have to cover the cost of caring for seriously ill people at the same price as the healthy pay. Every state that tried this “community rating” scheme (including New York) has seen premiums soar and healthy people stop buying insurance. It’s called the “death spiral.”
All these factors make “affordable” an impossible goal under ObamaCare’s rules. But the bailout provision is designed to conceal this fact through 2016.
As the Society of Actuaries explains, the bailout incentivizes insurers to set premiums too low, in order to make ObamaCare look affordable . That helps politicians tied to ObamaCare as well as insurers who want a bigger market share.
Meanwhile, insurers who opt not to participate in the exchanges can’t get bailouts and don’t get subsidies for their customers, so you won’t have the option of buying from them for long.
Think about it. If the federal government gave out subsidies to buy only Ford cars and told Ford Motor Co. not to worry about pricing the car, because taxpayers would make up Ford’s losses, how long do you think Chrysler and Toyota could compete?
Moody’s also cautioned that its downgrade is due largely to the “ongoing unstable and evolving environment,” as the Obama administration repeatedly revises the Affordable Care Act, decreeing “new regulations and announcements that impose operational changes well after product and pricing decisions were finalized.”
As any business owner will tell you, a temporary bailout is no substitute for the rule of law. The bailout keeps ObamaCare on life support, at taxpayers’ expense, while the free market expires and the rule of law disappears.