A Commentary by J. D. Longstreet
If you have, out of the goodness of your heart, been concerned for the continued welfare of the insurance industry in America under Obamacare, don't waste the tears nor the time worrying.
Believe me, they have been well cared for under the ACA.
I recently discovered just how well the insurance industry has been provided for by Obamacare by way of an article at businessweek.com. The article was written by John Tozzi and it is entitled: "A Guide to Obamacare's Backstop for Anxious Insurance Companies" It is an eye opener! We hardily recommend that every American read and thoroughly digest the contents of Mr. Tozzi's article. You will find it at: http://www.businessweek.com/articles/2013-11-19/a-guide-to-obamacares-backstop-for-anxious-insurance-companies
The rumors have been flying for weeks that a huge bail out is coming for the insurance companies (from the national treasury's tax payer money) toward the end of this year. Plus, the rumor that next year will definitely bring rate increases for all of us.
But written into the law are provisions that will preclude the insurance industry from losing its , uh, well, losing a fortune.
I dare say for most of us the term "risk corridors" is something new, and unheard of. But it is extremely important that we familiarize ourselves with the meaning of "risk corridors" post haste.
Consider this: "The risk corridors are part of an obscure set of Obamacare rules intended to protect insurance companies from deep losses if they sign up too many sick people—an insurance policy for insurance companies. It’s one of the so-called Three Rs—reinsurance, risk adjustment, and risk corridors—meant to backstop health plans through Byzantine adjustments in the transition to a new marketplace where carriers can’t turn sick people away." -- SOURCE: http://www.businessweek.com/articles/2013-11-19/a-guide-to-obamacares-backstop-for-anxious-insurance-companies
This is just one of the three "R's" neatly tucked into the fine print of Obamacare which most Americans will never find the time to read.
The three "R's" are: reinsurance, risk adjustment, and risk corridors. Above we've provided a bit of insight to our readers concerning risk corridors.
Reinsurance is a "temporary program intended to keep rates down by paying insurance companies much of the cost after a patient’s medical costs exceed $60,000 per year, drawing on a $10 billion pot of money for next year funded by a $63 tax on every single health plan." -- SOURCE: http://www.businessweek.com/articles/2013-11-19/a-guide-to-obamacares-backstop-for-anxious-insurance-companies
"The end result of this program, which is really transferring money from the group market to the individual market,” according to Hans Leida, an actuary at consulting firm Milliman, is designed to last for only three years, and it will -- most certainly -- drive up insurance rates when it ends in three years.
Then there is yet another program called known as "risk adjustment." It takes some premium money from health plans that paid out less than average—that is, their members were generally healthier—and gives it to plans with higher medical claims. It's designed to encourage insurance companies to sign up people with less than rosy cheeks and glowing health. Now here's the clincher: It is a permanent program intended, they say, to spread the risk out over all the companies. -- SOURCE: http://www.businessweek.com/articles/2013-11-19/a-guide-to-obamacares-backstop-for-anxious-insurance-companies
Senator Marco Rubio has called the risk corridor a “taxpayer-funded bail out of the health insurance industry.” Rubio had introduced a bill that would kill the risk corridor program for insurance companies. But frankly, there's not much chance that Rubio's bill will get anywhere in the Democratic Party controlled US Senate.
According to an article at the Daily Call;er dated December 26th, 2013, Byron York of the Washington Examiner told Fox News that there would be an insurance company bail out this year (2014). York is reported to have said: a bail out “absolutely will happen” under Obamacare. York claimed that a government lifeline is actually “built into the law" (Obamacare) for the Insurance companies.”-- SOURCE: http://dailycaller.com/2013/12/26/byron-york-insurance-company-bailouts-absolutely-will-happen-under-obamacare/#ixzz2pwO5buMO
Washington denies there will be a bail out, but, dear reader, that bail out is already written into the Obamacare law!
"First, Section 1341, the "reinsurance" fund collected from insurers and self-insuring employers at a nifty $63 a head. (Who do you think the cost is passed on to?) This yields about $20 billion over three years to cover losses.
Then there is Section 1342, the "risk corridor" provision that mandates a major taxpayer payout covering up to 80 percent of insurance-company losses." -- SOURCE: http://www.postandcourier.com/article/20140103/PC1001/140109881
So what happens if the insurance companies don't get the bail out they have been guaranteed?
Well, they could just pull out of Obamacare.
Look. Insurance is a BUSINESS. They are not about to allow their companies to go bankrupt over some hair-brained socialist scheme dreamed up by a group of egg-head, elite, academicians in Washington, DC. No. They'll either pull out of Obamacare, or they will get a huge bail-out of taxpayer money from the government. Since the latter is already in the law -- guess what's coming later this year?
The GOP has an opportunity here to pass a "no bail-out bill" and shuffle it over to the Democratic Party controlled Senate. With dems facing an election in a little over 300 days, it would be interesting, to say the least, to see how they would handle THAT hot potato -- pass the bill -- or fall on their own swords.
Or -- Congress could do the right thing and repeal Obamacare. But, of course, that's not going to happen until the GOP controls both houses of Congress and, quite likely, the Presidency, as well.
J. D. Longstreet
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