Obamacare's Bailouts May Be Extended



According to the text of Obamacare, the health law's risk corridors—the insurance industry backstop that's been dubbed a bailout—are only supposed to last through 2016. For the first three years of the exchanges, insurers who spend 3 percent more on health costs than expected will be reimbursed by the federal government. It's symmetrical, so insurers who spend less will pay in, but there's no requirement that the program be revenue neutral. After 2016, the program is scheduled to sunset, leaving insurers fully on the hook for any losses they might incur within the exchanges.

But now the Obama administration appears to be considering an extension of the provision beyond 2016, according to The Washington Examiner's Susan Ferrechio:

The Obama Administration may extend beyond 2016 a federal reimbursement program for health insurance companies that lose money by participating in the newly created health care exchanges.

Industry insiders told the Washington Examiner a plan to extend the Affordable Care Act's "risk corridors" are under discussion, but that administration officials have not made a final decision.

Obamacare's supporters have argued that the risk corridor program is supposed to aid in the transition to the new insurance markets. This suggests that the administration now believes that the transition is going to be longer and more difficult than expected. And, in combination with the insurance industry lobbying efforts to uphold the provision, it suggests that insurers believe they are likely to rely heavily on the program to mitigate potential losses.

Finally, as Bloomberg View's Megan McArdle* notes, it's hard to see how this would be legal. The text of the last says that "the Secretary shall establish and administer a program of risk corridors for calendar years 2014, 2015, and 2016 under which a qualified health plan offered in the individual or small group market shall participate in a payment adjustment system based on the ratio of the allowable costs of the plan to the plan's aggregate premiums." I'm not a lawyer, but that doesn't seem to allow a lot of wiggle room to extend the program for a few more years.

Granted, when it comes to implementing Obamacare, the administration does not seem overly concerned with the legal particulars. If this tweak is being considered, it's because the administration and insurers believe it's necessary to make the law work beyond 2016. Which suggests that the law could be in trouble for years to come. 

*I am married to this person.

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  1. *I am married to this person.

    So romantic!

    1. Well, yeah. Kind of.

      1. McMegan is the bomb.

    2. Her last name is changed to ‘Suderwoman’ or it never happened.

      1. We regularly refer to ourselves as the McSudermans.

        1. KORPORATE SHILLS!1!

  2. How’s Obama going to pull this off when he isn’t president in 2017?

    1. How’s Obama going to pull this off when if he isn’t president in 2017?


    2. Changing things like this on a whim will be illegal again.

  3. I sure am glad the President is making unilateral changes to the law, instead of letting those treasonous Congressmen change the law.

    1. I hereby declare impeachment proceedings against the president begun.

      1. Ha! You can’t do it unless the president gives the go-ahead!

      2. (reads rules)

        “Man…. we’re going to need a lot of peaches”

        1. I thought people-power was a good thing? I’m a people, and I have spoken.

          1. People, you are good people.

        2. Just do not bring any cinnamon.

  4. it’s hard to see how this would be legal. The text of the last says that “the Secretary shall establish and administer a program of risk corridors for calendar years 2014, 2015, and 2016”

    Oh, silly Megan and Peter.

    The “calendar years including, but not limited to, 2014, 2015, and 2016″ is *understood*.

    1. An emanation of a penumbra?

  5. How would an extension work if congress refused to fund it? Obama can say it’s extended but he can’t fund it. Are the insurer going to feel fully back-stopped? Doubt it.

    1. Which is part of my point below.

      This sort of “its ok to lose money”-encouragement doesn’t last very long. At some point, they’re stuck with the customers and they’re told to go ‘make it work’. And they tend to prepare for that day by getting ready *beforehand*. Which would mean significant rate hikes either this year or next year. Which is the entire point of this B.S. ‘extension’.

      Basically, the president feels perfectly ok spending billions of taxpayer money to create false optical view of the healthcare market so that he can help democrats get re-elected. But this is all perfectly legal, you see.

  6. This is like some tragi-comedy farce at this point.

  7. The suggestion of an extended loss-bailout, even in its legal non-existence at the moment, functions as an implicit signal to insurers than any price increases due to adverse selection in the risk-pools is considered extremely unfavorably, and the Administration would far prefer they *continue to lose money* while encouraging more people to join these plans, with the government covering all sustained losses.

    This is a reaction to the Aetna’s of the world who have looked at this system, and – being in the business of being in business – have decided that this whole scheme runs counter to the most basic principles of good business-sense, and started to suggest that backing out of participation may in fact be the more sensible path to take.

    Another problem with this loosey-goosey, make-it-up-as-you-go-along type of operating-style is that – despite the short term signals it may send to insurers to attempt to prevent expected 2015 rate-increases – it undermines the larger piece of legislation, which is increasingly meaningless in the constant barrage of ‘tweaks’ and ‘fixes’. Who can conduct any meaningful even-short-term planning in this sort of regulatory environment? They’ve already been planning on hedging losses for 2014 and 2015 – now they don’t have any idea *when* they’re supposed to be self sustaining and profitable, or WHO will be president at that time…?

    And they call this…*thing*…”Market Based”

    1. Obviously market failure. Moar government!

    2. The back end of the website is still not completed. Insurers can’t get payment, so they have to pay estimated amounts, and there are other issues. Supposedly if they don’t have it ready in another month, it will be a “disaster.”

  8. According to the text of Obamacare-

    Stop right there.

  9. All RISE! Oyez! Oyez! Oyez!
    As the king wills it, so it shall be!

  10. Just got called into the boss’s office to be informed that our company’s plan is “substandard” and will need to be replaced. We are below the 50 employee line, so right now the two options are to drop our coverage and make us fend for ourselves, or replace it with a plan that is 45% more expensive.

    Wasn’t there some jackass on this board claiming Obamacare only affected a very small number of people? Yeah, not so much. And I’m having a hard time convincing myself that my family and I really didn’t like that plan.

    1. Get some media coverage for this!

    2. That’s a good idea. I am supposed to go to the Obamacare web site to see how much their plans would cost. Once I get some numbers I’ll come out swinging. As a person with a pre-existing condition, I was supposed to be HELPED by this, not screwed over.

    3. If you like your boss, you’ll be allowed to keep your boss. Period.

  11. I thought people-power was a good thing? I’m a people, and I have spoken.

    Like a wren farting in a typhoon, your voice is.

  12. Laws? I got a phone and a pen.

    God Emperor Obama.

  13. Healthcare.gov problems alone are enough to keep enrollees away, but I wonder if many low-income folks are scared off by the possibility of the IRS finding out about under-the-table income? I live in D.C. and have had issues with their implementation already (I was trying to claim the subsidy; forum posts from people who don’t claim it seem to indicate a smoother experience), but during the financial info section it occurred to me that this could be a big problem. I know plenty of people who don’t claim some or all of their cash income.

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