Obamacare is killing the heath insurance industry, but help for health insurers is on the way - and it will be coming out the pockets of American taxpayers via higher insurance rates and a federal bailout.
When the government says, "Explore other sources of funding" and "working with Congress on the necessary funding," it's time to hide your wallet and get ready to study a few more pages of tax code.
As MRCTV reported Thursday, United Healthcare lost $425 million on its policies sold via the Obamacare exchanges, and they might back out of the exchanges all together after 2016. And United Healthcare isn’t alone. U.S. insurers had to absorb nearly $2.9 billion in unexpected medical expenses from their customers in Obamacare's exchanges in 2014, according to new data from Centers for Medicare and Medicaid Services.
The Milwaukee Sentinel Journal reports that some of the deficit will be made up with higher premiums, much higher premiums.
Many insurers have requested premium increases of 20% to 40% for next year. In August, Blue Cross Blue Shield secured approval in Tennessee for a 36.3% price hike, while Oregon OK'd a 25.6% increase for Moda Health Plan.
Even these premium increases are mild compared with what's coming when the risk corridor provision and other stopgaps expire.
A recent University of Minnesota study found that after 2016, the cheapest plans would experience some of the most dramatic premium increases. Families who purchased "bronze" plans on the exchanges could see 45% increases. Some unlucky individuals could see their premiums shoot up 96%.
"Our data still indicate that — for at least the next decade — premiums will increase faster than they did in the years before the Affordable Care Act's implementation," cautioned one of the study's authors. "Federal subsidies for ACA plans won't be able to keep up."
But, the federal government is going to try make the subsidies keep up. Pres. Obama's Department of Health and Humans Services (HHS) is promising insurance companies that taxpayers will help them out.
After the United Healthcare announcement on Thursday, HHS issued a letter to insurance companies recognizing the 2014 shortfalls and declaring that the U.S. Government needs to make good:
In the event of a shortfall for the 2016 program year, the Department of Health and Human Services (HHS) will 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.
Risk corridors were created by the Obamacare bill. The corridors are meant to redistribute money (sound familiar?) from insurance companies who make a bigger profit from exchange plans than expected and give to companies who lost money on the exchange plans.
The problem with the risk corridor in 2014 was that too many companies lost money - so, there wasn't enough money to cover everyone's losses. HHS is promising a bailout, or in HHS language, it will work with Congress to get more money for the risk corridors in order to cut insurance companies losses.
Robert Laszewski, president of consultancy Health Policy and Strategy Associates in Virginia, told CNBC:
"'The Obamacare business model doesn’t work,’ ‘Obamacare has got to be retooled.’ Laszewski cited the fact that insurers overall still are losing money selling exchange plans in the second year of Obamacare, and that as a result many of them are raising prices, which could in turn lead to current and prospective customers taking a pass on further coverage.”
According to Nathan Nascimento, Senior Policy Advisor for Freedom Partners:
“We already knew that this Administration has no problem with putting special interests ahead of Americans’ health care – but yet another bailout for insurance companies on the backs of taxpayers only throws more good money after bad. Washington’s flawed one-size-fits-all approach to health care has failed, leading to plan cancelations, skyrocketing premium and out-of-pocket costs, and instability for American families and business. The solution is to get government out of the way – not dig the hole even deeper."
Supporters of Obamacare are in denial. Much higher heath insurance premiums, insurance company losses needing a federal bailout, and news that almost half of the state-run Obamacare exchanges have bitten the dust, add up to one inconvenient fact: Obamacare is a failure.
Sadly, it won't be the politicians who forced the program down the American people's throats who will be reaching into their pockets to pay for that failure. It will be the rest of us, average American families, our children, and our grandchildren paying for this unmitigated disaster.