Republicans Prevent Bailout of Health Insurers

 

As I write this post on Christmas day, I am thankful for many blessings. One of those is that Republicans have prevented a bailout of the insurance industry.

There has been much criticism from the right that Republicans passed the 2016 Omnibus spending bill without achieving some conservative goals such as defunding Planned Parenthood. Reverend Franklin Graham demonstrated his frustration by publicly announcing he was leaving the Republican Party. I share his frustration over this issue because taxpayer funds are being used to support abortion. But there are some victories in this spending bill worth celebrating.

John C. Goodman, healthcare economist writing in Forbes, reminds us that President Obama campaigned in 2008 on a platform that portrayed insurance companies as the villains in the healthcare marketplace. But today Democrats in Congress and the Obama administration are trying to prop up these same villains because their pet legacy, ObamaCare, is threatened.

To understand what is happening we must go back to the original wording of the law (those 2570 pages no one in Congress read!) where a program called “risk corridors” is explained. The program calls for the federal government to redistribute money from insurers who made profits to insurers who incurred losses for the first three years. This program was an enticement written into the law to win the cooperation of the insurers in the rollout of the new healthcare system.

However, in 2014, the first full year of the law, most carriers lost money. The profitable insurers paid in only $360 million while the losers requested about $2.9 billion to cover their losses. The insurance industry pressured the White House to cover these excess losses of $2.5 billion, despite the fact that the original wording of the law called for the program to be “budget neutral.”

Senator Marco Rubio was largely responsible for assuring that the 2015 appropriations bill remained “budget neutral” so the insurance industry got only 12.5% of the requested $2.9 billion in bailout financing. But in the weeks leading up to this year’s omnibus spending bill debate, once again the White House and Congressional Democrats pushed for changing the terms of ObamaCare to bailout all the losses of the insurers.

The insurance industry did its part to dramatize the issue. United Healthcare, the nation’s largest healthcare insurer, dramatically announced they were ending all advertising and ceasing to pay broker commissions for plans sold on the ObamaCare exchanges. They declared expected losses of nearly $700 million by the end of 2016 and threatened to pull out of the exchanges by 2017. Cigna has also announced it may follow United and pull out as well.

2016 Omnibus Spending Bill

Just before Christmas, Congress passed the 2016 Omnibus spending bill, allowing the funding of the government until September 30, 2016. But the ObamaCare insurance industry bailout never happened. Here is a summary of the particulars of the bill concerning healthcare financing taken from the website of House Appropriations Committee Chairman Hal Rogers:

ObamaCare – The bill provides no new funding for ObamaCare. Specifically, the bill:

  • Stops any taxpayer bailout of the Risk Corridor Program
  • Blocks the Prevention and Public Health Fund (PPH Fund) from being used as an ObamaCare slush fund.
  • Cuts the Independent Payment Advisory Board (IPAB), created by ObamaCare, by $15 million.
  • Restricts HHS from using taxpayer dollars to lobby for ObamaCare.
  • Directs the Inspectors General at HHS and the Treasury Department to report on improper payments of ObamaCare tax subsidies.

 

The insurance industry bailout has been thwarted for another nine months, allowing insurers to bear most of the impact of their losses. To be sure, insurers are suffering from this train wreck called ObamaCare and will continue to incur even greater losses unless the system is repealed and replaced with an alternative that gives consumers more control over the choice of their healthcare insurance, their doctors, and their treatment. But a taxpayer bailout of a broken system is no way to run the government.

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