Obamacare’s Risky Business

House Energy & Commerce Committee: Folks in all 50 states know Obamacare is “the craziest thing in the world.” But let’s take a quick step back in time to look at how predictions about Obamacare’s risk mitigation programs, sadly, have come true.

A March 2014 column by Dr. David Blumenthal featured by The Commonwealth Fund highlights the “Three R’s” that have “…the intended effect of keeping premiums down in 2014 and moderating likely increases in 2015. Risk corridors and reinsurance provisions from 2014 to 2016. Risk adjustment is permanent.”

Risk corridors, reinsurance, and risk adjustment – three very risky programs that are not working. Together as predicted they are mounting to #RateShock, fewer options, failures, and closures.

Here’s a look at Obamacare’s risky business – explained then (in the 2014 column) and now.

Risk Corridors
THEN “Because the ACA marketplaces are so new and the health risks of new enrollees uncertain, some insurance companies could make a windfall or lose their shirts in the early years of the rollout. This could encourage companies to set premiums higher than necessary just to make sure they aren’t among the losers. To prevent this, the federal government has created a program under which it will collect money from plans sold in the new marketplaces with unexpectedly high gains and redistribute them to plans with unexpectedly high losses.”

NOW Congress has acted twice on a strong, bipartisan basis to ensure that the risk corridors program is budget neutral, and no taxpayer dollars are used to cover losses by plans. Just last month, CMS Acting Administrator Andy Slavitt testified under oath that the administration is looking to settle the growing number of lawsuits using taxpayer dollars. But wait, the administration’s own Justice Department has a different opinion. These lawsuits are shaping up to be Obama v. Obama.

Reinsurance
THEN “Reinsurance manages this risk by literally insuring insurance companies against it. Using fees collected from all the nation’s health insurance companies (essentially, insurance premiums paid by insurers), the federal government proposes to pay nongrandfathered insurance plans 80 percent of the costs between $45,000 and $250,000 experienced by any of its enrollees in 2014. In 2015, the terms may change to 70 percent coverage for costs between $70,000 and $250,000. Reinsurance disappears in 2016… The plan is budget neutral: when the funds collected from insurers run out, the government stops paying. No taxpayer bailout here either.”

NOW The government’s nonpartisan watchdog last week issued a legal opinion declaring that the administration’s reinsurance scheme ignores the clear intent of law. While it took the Comptroller General five months to draft the most credible legal opinion possible, it took the Obama administration less than five hours to say they reject the watchdog’s opinion. Ignore the law, then the legal opinion... two wrongs don’t make a right.

Risk adjustment
THEN “Risk adjustment is a process that deters insurance plans from trying to attract healthy enrollees (“cherry picking”), and protects companies that may—by chance or because of their particular benefits—attract sicker than average customers (“adverse risk selection”). Though the Affordable Care Act bans carriers from turning people down or charging them more based on their health, the incentive to attract healthier enrollees remains because healthier customers increase profits by reducing companies’ payouts. With healthier enrollees, plans can also reduce premiums while maintaining profit margins. This tends to reinforce their advantage with healthy customers, who are often most price-sensitive.”

NOW This program – the only permanent one of the three – was so off in its formula that the administration is having to rethink the entire process.

Risky business? No doubt. The good news is House Republicans have A Better Way.

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