Health-insurance executives are starting to warn of double- and even triple-digit premium hikes for health plans sold on the ObamaCare exchanges for 2015. But Health Secretary Kathleen Sebelius told Congress last week that any ObamaCare premium hikes would be modest. In fact, the Obama administration is scrambling to rewrite the law to make that happen.
After close of business Friday, the administration proposed greater bailout protection for insurers who sell exchange plans. The new rule sweetens what the Affordable Care Act provided (at taxpayer expense, of course) to protect the companies from losses. It’s illegal, because no president has the constitutional authority to rewrite any law, including the Affordable Care Act.
It’s a clear effort to head off these sky-high premium hikes, which would be announced publicly in the months ahead, further angering voters just before the November elections.
Until last Friday, insurers faced two options: Hike premiums skyward or drop out of ObamaCare. The administration is providing a third option — an enhanced bailout for companies that incur losses.
The Affordable Care Act, as written and enacted in 2010, already contained a bailout provision, Section 1342, to make insurers whole for losses up to a point.
Such losses were likely, because ObamaCare rules make it impossible for an insurer to offer “affordable” plans and still cover costs. 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. And premiums have to cover the cost of caring for seriously ill people for the same price as healthy people. Every state that tried this “community rating” scheme (including New York ) has seen premiums soar as the healthy, unwilling to foot the bill, stop buying insurance.
The bailout provision (known as “risk corridors”) was inserted to encourage insurers to set premiums low, secure in the knowledge that their downside risks were limited. It went unnoticed until last November, when public outrage over millions of canceled plans moved President Obama to make one of his many ad-hoc changes to the law.
As written, the law forced insurers to cancel policies that didn’t comply with Obamacare’s one-size-fits-all coverage requirements. But the president told insurers they could keep selling the noncompliant plans. When the companies complained that this sudden change would wind up costing them money, Obama health official Gary Cohen pointed to Section 1342 and even promised to sweeten the bailout’s rules to “provide additional assistance.”
And that help came Friday, when the administration lawlessly enlarged the bailout for 2015. The key change hikes insurers’ permissible profit margins from the 3 percent spelled out in the Affordable Care Act to 5 percent, a hefty increase. Another “fix” (this one to HHS regulations) would increase how much of premiums can be spent on things other than patient care — pushing it up from 20 percent to 22 percent — allowing more for administration, salaries, etc.
So insurers can make more money, deliver less to patients out of their premiums and still qualify for a bailout. Nice.
President Obama continues to dismantle his own law, hacking off some provisions and remaking others as needed in order to minimize Democratic losses this fall — health reform be damned. Other recent ad-hoc changes include letting people continue to buy their old, noncompliant plans through 2016, and virtually eliminating the tax on people who don’t buy insurance.
Popular with John Q. Public, perhaps, until he finds out he has to prop up the insurers who’ll lose money because of these changes.
But only through 2016, when the law says the bailouts will end. Conveniently, that’s also when Obama leaves office and insurers have to face the music.
No wonder the rating agency Moody’s just lowered its outlook on the insurance industry from stable to negative, blaming the “ongoing unstable and evolving environment” as the health-care law proves unworkable.
In 2016, it seems, insurers will start paying their due for embracing a scheme that forces the public to buy their product and bail them out to boot. Just deserts.
The real victim is John Q. Public — forced to throw good money after bad to prop up the president’s unworkable law.