Friday, November 20, 2015


HHS: Bailing out Obamacare insurers an 'obligation' of the federal government


Ominous signs for the future of Obamacare

Washington Examiner

00:00 / 02:02

The Department of Health and Human Services attempted to reassure private insurers on Thursday that they'll be able to recover losses from participating in Obamacare by claiming it was an "obligation" of the U.S. government to bail them out.

At issue is a provision within the law known as the risk corridors program. Under the program, which runs from 2014 through 2016, the federal government is to collect money from health insurers doing better than expected and use those funds to provide a federal backstop to other insurers who incur larger than expected losses from rising medical claims. The idea was to provide training wheels to insurers in the first years of Obamacare's implementation, and to take away any incentive for insurers to cherry pick only the healthiest customers.

Republicans, fearing that this could turn into an open-ended government bailout in the event of industry-wide losses, included a provision in last year's spending bill that limited the program, requiring HHS to pay out only from the pool of money collected, rather than supplementing it with other sources of government funding. President Obama signed that bill.

Now that insurers have been able to look at medical claims, what they've found is that enrollees in Obamacare are disproportionately sicker, and losses are piling up. For the 2014 benefit year, insurers losing more than expected asked for $2.87 billion in government payments through the risk corridors program, but HHS only collected $362 million from insurers performing better than expected. Thus, the funds available to the federal government only amounts to 12.6 percent of what insurers argue that they're owed.

So insurers are not happy. And now the industry lobbying group America's Health Insurance Plans — which happens to be helmed by Marilyn Tavenner, who previously oversaw the implementation of Obamacare as head of the Centers for Medicare and Medicaid Services — is aggressively fighting for more money.

In a statement issued Thursday, the same day that the nation's largest insurer, UnitedHealthannounced it may exit Obamacare due to mounting losses, Tavenner said, "We've been very clear with the administration about the serious challenges facing consumers and health plans in this Exchange market. Most recently, nearly 800,000 Americans have faced coverage disruptions as a result of the significant and unexpected shortfall with the risk corridors program. When health plans cannot rely on the government to meet its obligations, individuals and families are harmed as a result. The administration must act to ensure this program works as intended and consumers are protected."

In an effort to reassure the industry, CMS, the HHS agency Tavenner previously led, issued guidance reiterating that HHS would use money collected from insurers in 2015 and possibly 2016 to make up the $2.5 billion shortfall that exists in 2014.

But what happens if there still isn't enough money, and after 2016, the program is taking in less than the money sought by insurers?

HHS said it, would "explore other sources of funding for risk corridors payments, subject to the availability of appropriations. This includes working with Congress on the necessary funding for outstanding risk corridors payments."

The agency further added: "HHS recognizes that the Affordable Care Act requires the Secretary to make full payments to issuers, and HHS is recording those amounts that remain unpaid following our 12.6 percent payment this winter as fiscal year 2015 obligation of the United States government for which full payment is required."

In reality, this doesn't mean much at all. Risk corridor payments for 2016 won't be due until mid-2017, and by that point, it will be an issue for a future Congress and future president. Nothing that a previous administration's HHS said in 2015 will really matter.

That said, this is another demonstration that for all of Obama's sanctimonious rhetoric about taking on insurance companies. In reality, his signature legislative achievement was to put government in bed with private insurers. And now that his pet project backfired, he wants taxpayers to take care of those very insurance companies he spent years railing against.


  1. "UnitedHealth Group, the nation's largest health insurer, told investors Thursday that losses from its 550,000 customers on Obamacare exchanges are expected to hit $650 million this year and next.

    As a result, CEO Stephen Hemsley said that UnitedHealth is pulling back from the exchanges and considering exiting them entirely in 2017. "We cannot sustain these losses," he said flatly.

  2. "So far, eight of the 23 health insurance cooperatives originally formed as an alternative to private insurers operating on the government’s exchange have announced they will close their doors by the end of the year. Those eight are in Colorado, Iowa, Kentucky, Louisiana, New York, Nevada, Tennessee and Oregon. There are strong indications that other co-ops will close as well as the Obamacare signup period begins shortly.  

    All the co-ops received 15-year loans of different amounts to provide subsidized health insurance to poor and low-income Americans and to encourage competition with private, for-profit insurance companies. At least a half million Americans will lose their coverage by the end of the year and will have to find replacement policies – probably with higher premiums and deductibles.

    Moreover, more than $900 million of the original $2 billion in federal loans to the co-ops to help them get off the ground has been lost, according to media reports."

    1. The replies you will get are the standard denial.

      If the ACA has problems the GOP should fix it.
      It was a GOP plan
      What's the GOP's plan? They don't have one.

      Needless to say, the country is in denial. The ACA is flawed and was never meant to reduce the cost of healthcare but insure more people at the expense of others.

      just saying.

    2. In fairness Lou, what else is there to say. I think most people fall into a couple of camps, those who want the ACA fixed, and those who want it overturned. It kinda doesn't matter which party has more of one or the other. I don't see a bridgeable gap. As an honest question, do you?

      Am I missing some other group that exists?

    3. How do you fix the ACA Max?

      There is nothing in the law that will reduce the cost of healthcare. Insuring more means lower prices is a myth.
      It really isn't insurance. Insurance is for unexpected events. BC pills, immunizations etc. are not unexpected events.
      You cannot expect more for free, and expect lower prices.

      How do you get the healthy to sign up? If the fine is a thousand a year, insurance 3K a year, why would you buy insurance. Can't be turned away from the emergency room if you don't have insurance.

      So how do you fix this mess when some get subsidies, others do not. Some get free coverage some do not. It's paid for by a maze of taxes of various business, people and fines.

      Some claim single payer will fix it. It would certainly cost more. The key, no one wants to pay for it. No one wants to pay more in taxes, everyone wants more.

      The American way.

      Imagine this. End the tax on medical devices. How do you replace the lost revenue? They certainly will not agree on that one. End the Cadillac tax, how do you replace the lost income to pay for the free???

      So max, Replace it? With what?

      I have not seen an effort by the democrats to fix anything in the ACA. The Repub's certainly have not proposed any more fixes.

      And there we have it.

    4. Obama’s epitaph:
      Failed health care initiative
      Racial unrest
      Stagnant economy
      Middle east in flames

      Have I missed anything?