A $5 Billion Obamacare Windfall for Insurers?

Oregon’s health insurance co-operative is yet another Obamacare failure. It squandered taxpayer-backed handouts and loans, disappointed its customers and now has shuttered its operations.

But with an audacity that would make even Donald Trump blush, Health Republic of Oregon wants more taxpayer money. Its executives are suing the federal government to demand more government handouts.

The Obama administration just might settle the case and give Health Republic and hundreds of other insurers the $5 billion that the class-action lawsuit seeks.

Co-ops like Health Republic were conjured into existence by Obamacare on the theory that people who didn’t know much about insurance — fortified with good intentions and government money — could compete successfully against established and experienced health insurance companies. Oregon, New York and New Jersey were sister co-ops in the Health Republic alliance.

Health Republic had plenty of good intentions, boasting that it was “more than just an insurance company.” It turned out to be quite a bit less. The New Jersey co-op is the only member of its alliance that continues to sell policies, after Oregon and New York folded.

But not before losing a lot of taxpayer money. The Oregon plan received $50 million in federal startup loans and millions of dollars in additional government handouts for 2014 alone.

The co-op’s website blames its failure on the government “not following through on its promise” of an additional $22 million in handouts.

Health Republic expected to get that money through Obamacare’s “risk corridors,” a program in which the government transfers “excess profits” from successful insurers to companies that suffered “excess losses.” As it turned out, “excess losses” among Obamacare plans in 2014 were $2.5 billion greater than “excess profits.” The administration decreed that taxpayers would supply the difference.

Congress said no. It has twice passed laws, both signed by the president, prohibiting the government from paying out more to unsuccessful insurers than it collected from successful ones.

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About the author

Doug Badger

Galen Institute Senior Fellow Doug Badger’s career in public policy spans more than three decades and includes stints as a policy adviser to the White House, the U.S. Senate, the Department of Health and Human Services and the Social Security Administration…. Full Biography