Obamacare: Do insurers get a ‘bailout’?

The secret is out: If Obamacare fails, said Ramesh Ponnuru in Bloomberg.com, it will be sustained by “a massive taxpayer bailout.” Last week, Republican Sen. Marco Rubio introduced legislation repealing an obscure clause in the Affordable Care Act that all but guarantees a multibillion-dollar bailout for insurance companies. This “risk corridor” provision states that if insurers pay out more than 108 percent of premiums collected from their Obamacare customers, “taxpayers are on the hook for about 75 percent of that extra cost.” Part of that cost would be absorbed by insurers that make big profits on the exchanges. But because Obamacare’s design and rollout were so botched, few healthy young people may sign up, meaning the exchanges as a whole will inevitably need a taxpayer bailout. Health insurers should have anticipated the likelihood that “young invincibles” would shun Obamacare, said Deroy Murdock in NationalReview.com. If they botched their calculations, then insurers—not taxpayers—should foot the bill.

“There is no Obamacare bailout,” said Jonathan Chait in NYMag.com. Bailouts are handouts given to companies who go bust because of taking on foolish risks. In contrast, the risk corridors—which will only be in place for the law’s first three years—were designed ahead of time to ease the transition from the old system to the new, and protect insurers from huge losses during this volatile period. Obamacare’s teething problems might mean the exchanges have more sick than healthy customers this year, “and the payout will exceed the payback.” But as more young folks sign up over time, those gains and losses should balance out. Anyway, risk corridors are hardly a new idea, said Jonathan Cohn in NewRepublic.com. They’re also a permanent feature of President George W. Bush’s Medicare Part D reform. Why didn’t Republicans attack that bill as an insurer bailout? It wasn’t “signed into law by a guy named Barack Obama.”

Republicans should be wary of jumping on “this anti-bailout bandwagon,” said Grace-Marie Turner in Forbes.com. While they’re understandably angered by this stunt to prop up Obamacare, do conservatives want to take the blame if insurance premiums soar? Besides, if we turn insurers into the enemy, we’re playing into the hands of liberal Democrats. They’d like nothing better to purge insurers from the health-care system, and put the government fully in charge.

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