Many insurance companies are losing money selling Obamacare policies. Unfortunately, the White House wants to make their losses your problem.
In December, Congress refused an administration request to provide insurers with $2.5 billion in bailout money to help cover their 2014 losses.
The Obama administration hasn’t given up. It has declared that this $2.5 billion in corporate welfare – and potentially billions more for losses insurers have incurred in 2015 – is “an obligation of the U.S. government for which full payment is required.”
Insurers would receive a windfall if the White House finds a way to use your tax dollars to meet this “obligation.”
For instance: Blue Cross and Blue Shield of Texas would pocket $257 million, which would bring its corporate welfare haul for 2014 to $843 million. Other losers made whole include such giants as Humana ($213 million), Blue Cross and Blue Shield of Illinois ($172 million) and Coventry ($101 million).
At issue is a corporate welfare payment called “risk corridors.” Under this Obamacare provision, insurers whose profits exceed expectations must subsidize their competitors whose margins disappoint.
In theory, the federal government’s only role is to transfer the “excess” profits of successful insurers to companies that suffered “excess” losses. Properly enforced, it should not cost taxpayers a dime.
But because most companies lost money, excess losses surpassed excess profits by $2.5 billion in 2014, and the White House believes it’s your “obligation” as a taxpayer to supply the difference.
The government already has ladled out tens of billions in tax dollars to make selling Obamacare policies profitable for health insurance companies.
It spent $18.5 billion subsidizing premiums for low-income people in 2014, delivering millions of new customers to the industry. And it doesn’t only subsidize poor families.
Obamacare also provides billions in corporate welfare subsidies to insurance companies. In 2014, the government assessed every person enrolled in an employer-sponsored health plan $63 —or $252 for a family of four, and is giving that pile of money — nearly $10 billion — to insurers that sell Obamacare policies.
In addition, Washington uses tax penalties to steer more business to insurers. Health insurance is the only private product Washington requires you to buy.
But after all the corporate welfare, subsidies and mandates designed to help the industry, most insurers somehow managed to bleed red ink on their Obamacare line of business in 2014.
So industry lobbyists are seeking bailout money. It would be an unusual bailout.
Unlike General Motors, which faced the prospect of shuttering its plants and laying off thousands of workers, the insurance industry is prospering, with market capitalization of around $2.4 trillion.
Most of the biggest companies are diversified and booking handsome profits selling their product to employers, Medicare beneficiaries and Medicaid recipients. They shouldn’t ask you to absorb their Obamacare losses.
Insurers complain that the government is reneging on its deal to stick taxpayers with their excess losses. That’s a dodgy claim. Lawmakers assumed that risk corridors would be budget neutral when they wrote the law, and the Congressional Budget Office at one point predicted the government would make money on the program, as it does with Medicare prescription drug risk corridors.
The Obama administration announced in March of 2014 that risk corridors would be budget neutral. It later reversed itself, bowing to an industry lobbying campaign. The administration changed the rules in the industry’s favor. Congress later changed them back.
But even if they had a legitimate gripe, insurers would hardly be Obamacare’s only victims. Millions of individuals and small firms have had their policies canceled and have been forced to switch to plans that cost more, that restrict their choice of doctors, and that require them to pay more out of their own pockets for medical care.
Washington has provided private citizens no relief, demanding that they adjust and adapt. It should ask no less of health insurers.
A former special assistant to President George W. Bush for economic policy, Doug Badger is a senior fellow at the Galen Institute, a nonprofit research organization focusing on market-based health policy solutions.