Back in 2010, Obamacare was like the Titanic heading off on her maiden voyage. Critics warned people not to hop aboard, that disaster was inevitable. But the president, his allies in Congress and lots of big insurance companies assured everyone that, even though they couldn’t see the blueprints, they had, in fact, designed an unsinkable ship of government-run health care.
Now, billions of dollars and 17 failed co-ops later, the captain and crew of USS Obamacare are demanding that everyone stay below-deck and continue bailing out their sinking ship and the insurance companies taking on more and more red ink in Obamacare exchanges.
Congress shouldn’t oblige them. It’s time to hit the lifeboats.
The latest bailout proposal would extend a temporary provision in the woefully misnamed Affordable Care Act.
The provisional Transitional Reinsurance Program, which took effect in 2014 and is scheduled to expire at the end of this year, imposes a contribution tax on employer-sponsored health plans. The proceeds are used to reimburse insurers offering ACA-compliant individual market coverage for taking on expensive, high risk enrollees.
These corporate subsidies were originally meant to be a temporary fix while companies adjusted to a market with the federal government’s finger on the scales.
The authors of Obamacare realized that because their bill created exchanges offering comprehensive and heavily subsidized individual coverage, people with expensive medical conditions would be motivated to seek such coverage in favor of their existing (mostly employer-based) plans. The designers assumed that a little temporary support would handle the problem.
However, as critics predicted, Obamacare set in motion much bigger and more costly consequences in the insurance market. Faced with mounting losses, more and more insurers are abandoning the exchanges.
Blue Cross and Blue Shield of Nebraska recently announced it is withdrawing from the exchange next year, while BlueCross BlueShield of Tennessee said it will no longer offer exchange plans in that state’s three largest markets: Nashville, Memphis and Knoxville. Meanwhile, remaining insurers are hiking premiums by 20 percent or more.
And the problems aren’t confined to Obamacare exchanges. People who buy individual insurance but don’t qualify for a subsidy are being hit with the full cost of premium hikes and facing decreased coverage choices as well.
For instance, Wellmark, the parent company of Blue Cross and Blue Shield of South Dakota, which has never participated in the exchanges, announced that it will also stop selling ACA-compliant individual market policies off the exchange. So, a self-employed South Dakotan can keep his or her old (pre-Obamacare) Wellmark policy, but others wanting or needing new individual coverage will no longer be able to buy it from that state’s largest insurer.
It’s worth noting that Wellmark is not some greedy for-profit insurer. Rather, it’s a policyholder-owned company — the exact kind that Obamacare tried to replicate through its now-failed co-op program.
The same politicians who rammed this doomed Titanic through Congress in the first place are now pushing to extend the reinsurance program.
Yet doubling down on disaster is not a solution. Rather than try to prop up an ill-designed law, Congress needs to systematically repeal and replace Obamacare’s dysfunctional policies with more sensible solutions — starting with the law’s most damaging provisions.
Contrary to the assertions of Obamacare supporters, there are other ways to ensure that needy individuals get the medical care they need without wrecking health insurance markets for everyone else. The Heritage Foundation proposed one such approach, called “A Fresh Start for Health Care Reform,” two years ago. Other think tanks and several lawmakers have also proposed promising, free-market options.
As for the remaining insurers, rather than lobbying for short-term bailouts, they would be better off helping Congress design more workable replacement solutions for the long-term.
Obamacare is sinking fast. We need to transfer the passengers to a safer, more sea-worthy ship.
A former Republican U.S. Senator from South Carolina, Jim DeMint is president of The Heritage Foundation.