By Grace-Marie Turner
Conservatives who are angry with health insurance companies over ObamaCare are getting behind legislation to stop the “bailout” of the industry, but they may regret the consequences.
Rep. Mike Coffman, R-Colo., is the latest to introduce legislation, called the “No Bailouts for Insurance Industry Act of 2014,” that would repeal two sections of the ACA, Section 1341 – the “reinsurance” fund – and Section 1342 – the “risk corridor” provision. The reinsurance and risk corridor provisions were designed to help cover losses if companies found that those who had selected their plans in the health insurance exchanges were significantly more expensive to cover than predicted.
Sen. Marco Rubio, R-Fla., is sponsoring similar anti-bailout legislation and wrote an op-ed in The Wall Street Journal last year explaining that his bill “would eliminate the risk corridor provision, ensuring that no taxpayer-funded bailout of the health insurance industry will ever occur under ObamaCare. If this disaster of a law cannot survive without a bailout rescue valve, it is yet another reason why it should be repealed.”
A series of worst-case scenarios is unfolding that could trigger the bailout, starting with the incredible difficulty of enrolling in exchange coverage through the botched website and significantly more older – and presumably sicker – people signing up. The administration has been pleading with young, healthy people to enroll so they can pay more than their share for insurance to offset the more expensive older people signing up. But they’re not buying it.
Further, the president keeps changing the law. The companies priced their policies under one set of rules, and people now are buying policies – or not – under a very different set of rules. The president has allowed non-grandfathered plans to be extended, for example, and he has given a waiver from the individual mandate to people whose health insurance policies were cancelled last year because they didn’t comply with ObamaCare’s mandates. These and other moves draw more healthy people out of the exchange pools.
The American Academy of Actuaries has warned that such changes could destabilize the new markets and result in higher premiums in 2015. This would trigger the risk-corridor and reinsurance provisions of the ACA, which many conservative leaders say are “bailouts” for the industry. They are supporting the Rubio and Coffman bills to protect taxpayers by repealing one or both provisions.
But every action or change can have a series of unintended reactions in this Rube Goldberg contraption of a law. And it is important to be aware of these risks of making changes.
It is likely that insurance companies would have to increase premiums higher than otherwise if the reinsurance and risk corridor provisions were altered, as the Actuaries warned. Republicans could be blamed for causing premiums to be even higher than they will be next year.
Also, taxpayers are on the hook either way. If premiums go up, taxpayer subsidies for policies purchased through the exchange will automatically increase as well.
Some conservatives say that a vote by the House would be safe because the legislation never would be taken up by the Senate or signed by the president. But I’m not so sure. The Democrats and especially the president would like nothing more than to have someone else to blame for at least some of the failures of Obamacare. If Republicans initiate this legislation, then the White House could blame them for the higher health insurance premiums that would result.
Attacking the private health insurance companies was exactly the tactic that the Democrats used to get ObamaCare passed in the first place. And liberals are urging the White House to revive the strategy.
An article late last year in Politico underscored this: “Democratic allies…are publicly and privately urging the White House to ramp up its attacks on insurers, arguing that the tactic shored up support as they struggled to push the bill through Congress. A group of Democratic strategists pressed senior administration officials during a conference call last week. They’d like a repeat of 2009-10, when then-House Speaker Nancy Pelosi (D-Calif.) called insurers ‘the villains,’ Obama blasted their willingness to ‘bend the truth or break it,’ and Health and Human Services Secretary Kathleen Sebelius accused them of banking excessive profits.”
And Democratic pollsters are saying the same thing: “When Obamacare got into trouble, we juxtaposed our message against the insurance companies, which are very unpopular,” said Celinda Lake, a Democratic pollster who has advised her 2014 clients, including Alaska Sen. Mark Begich, to go after insurers. “We should be messaging against the insurance companies this time as well. This is not good faith. If there is a snowstorm, the insurance companies are blaming it on Obamacare.”
If we attack the insurance companies, we are playing from the liberal playbook. We should focus on the bigger battles, like delay and ultimately repeal of the individual mandate.
While the anger over ObamaCare and its massive failures is real and legitimate, I think conservatives need to be careful with this “anti-bailout” bandwagon. It really does play into the hands of critics of private health insurance companies who are still distraught they didn’t get a government “public option” when the law was passed.
Where else would conservatives propose that people go for health insurance? Liberals see the government as the answer, of course. Conservatives don’t, but our free-market policy alternatives do depend upon people having choices from a range of private health insurance and health coverage options.
Further, the “anti-bailout” initiative takes time, energy, and focus away from the much more dangerous provisions of ObamaCare, especially the individual mandate, the employer mandate, new and higher taxes, and the next wave of people losing their insurance because it doesn’t comply with the law’s long list of mandates and rules.
Do we really want to invest effort in this anti-bailout bill instead of focusing on the structural damage core provisions of ObamaCare are doing to our health sector and economy?
Posted on Forbes January 15, 2014