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Obamacare and insurance companies in a death grip

Obamacare and insurance companies in a death grip

Obamacare giveth to the insurance companies and then it taketh away. And then it giveth back again.

We’ve finally gotten some data on who has actually signed up for Obamacare on the exchanges.

At first glance, it would look bad for the insurance companies. There are way fewer young people (only 24% are between the ages of 18 and 34) than the original stated goal.

But it doesn’t matter for the first year or two because the government has guaranteed to insurance companies that they’ll be protected against loss.

So the fact that enrollees may be older than expected—and therefore much more likely to make claims and reduce insurance companies’ profit margins—is okay because government will take up the slack.

And by “government” we mean, of course, the taxpayer. And by “taxpayer” we mean the wealthy taxpayer, although the middle class taxpayer also will pay more in many circumstances.

Here’s a list of the taxes that are supposed to fund Obamacare. Will they be adequate to cover the fact that nearly 80% of the exchanges’ enrollees are getting subsidies so far? It depends on whether this was approximately the number anticipated, and also on whether the tax revenues actually collected will be as great as had been projected.

The Byzantine nature of Obamacare is reflected in the fact that one of the largest items in the list of Obamacare funding tax sources is the following:

$60.1 Billion [projected amount of revenue]: Tax on Health Insurers: Annual tax on the industry imposed relative to health insurance premiums collected that year. Phases in gradually until 2018. Fully-imposed on firms with $50 million in profits.

So Obamacare giveth to the insurance companies and then it taketh away. And then it giveth back again, in a sort of shell game.

A significant amount of the revenue that insurance companies get from Obamacare is from the government subsidizing those who might not otherwise buy insurance, and a significant amount of the money the government gets in order to go about subsidizing those people is from taxes paid by insurance companies, which are then given back to the insurance companies in the form of customer subsidies for low-income policyholders, and then…well, you get the idea.

There are a number of ways that Obamacare could go under despite the government’s stalwart attempt to protect insurance companies from loss and therefore gain their cooperation/collaboration.

One is if people decide not to comply with the individual mandate if they become aware that there is no real way to enforce it unless a person is due a tax refund from which it could be deducted. That could change, of course, if the government sees that too many people are defying the mandate.

But the legislature would have to pass a law to that effect, and to do that the legislature would have to turn more Democratic, which doesn’t seem likely in 2014. Of course, Obama could probably overcome this problem in his favorite way: by executive order or through government agency, bypassing the legislature altogether and putting more teeth into the collection process.

Another potential problem for Obamacare is the fact that the House is considering a bill to abolish the risk corridor and reinsurance protection for insurance companies: i.e. the insurance company bailouts. Such a bill could pass in the House, but it’s hard to believe it would have a chance in the Senate, at least not in this Senate.

But in 2015 there’s a possibility, if things keep going the way they’ve been going. This could potentially destroy Obamacare if insurance companies suffer losses as a result; that’s why insurers are lobbying so mightily against such a bill.

In case you haven’t followed some of these more arcane aspects of Obamacare, here’s how the risk corridor and reinsurance programs are supposed to work:

The bailout provisions of Obamacare are found in Sections 1341 and 1342 of the Affordable Care Act…The first provision bails out insurance companies for costs associated with individual patients when they exceed $45,000. Under this so-called reinsurance program, insurers will be able to push off 80 percent of costs between $45,000 and $250,000 onto a fund financed by a fee of $63 per head on customers of insurance companies and workers covered by self-insuring companies…And in the event that the fund does not generate revenue sufficient to cover its costs — far from an unlikely scenario — then taxpayers will be explicitly on the hook. This preemptive bailout was included in the law as a deal-sweetener to induce more insurance companies to participate in the program…

The second and potentially even more troubling bailout provision is the one for so-called risk corridors, which asks the insurance company to project their total costs and then picks up most of the difference if losses should exceed those targets…Senator Marco Rubio already has introduced a bill to repeal this provision, though it is unlikely to pass…

The potential costs and risks associated with these provisions are worrisome, and the fact that they are in effect hidden from the public is troubling in and of itself. The complexity of Obamacare is by design: By obscuring the realities of the program, Obamacare’s architects ensured that it would be easier to peddle…

If Congress had tried to pass a law simply transferring $1 trillion to insurance companies over the next decade, there would have been energetic resistance to its doing so. The Affordable Care Act amounts to the same transfer, even as it places insurers in the enviable position of having a federal law in place that gives Americans a choice between buying their products and being fined by the federal government.

…[T]he insurance bailouts…represent an open-ended claim on taxpayers’ resources and a transfer of risk from private, profit-seeking enterprises onto the government. Together, the provisions represent an important part of the Democrats’ agenda for transforming what we know as insurance companies into semi-public utilities managed by central planners in Washington.

Most Americans do not understand this, and it’s not necessarily because they’re stupid. It’s because the facts have been purposely suppressed. It’s also because the law is complex and requires study, and many people’s eyes glaze over when discussing the finer points of health insurance and funding.

And then of course there are a number of people who couldn’t care less, as long as the subsidies go to them.


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Every time I read about this mess I get the urge to throttle John Roberts. Everything goes back to the idiotic decision he made so the media would look favorably upon him.

    MarkS in reply to gasper. | January 15, 2014 at 10:01 am

    It had to be more than bad press Roberts was worried about to write such crap!

      Radegunda in reply to MarkS. | January 15, 2014 at 12:05 pm

      It appears that Roberts changed his opinion rather suddenly after he had already started writing an opinion to strike the law down.

        richardb in reply to Radegunda. | January 15, 2014 at 12:51 pm

        Maybe the NSA caught Justice Roberts or his close family member in a compromising conversation?
        CIA Director Petreus also went totally silent as well over Benghazi when many CIA people were left to die with no backup.
        Got to wonder given Obama’s sincere desire to use the Federal powers to go after his opponents.

        On the flip side, Justice Roberts exposed Obama to the opprobrium of the rollout and the lies used to sell Obamacare to the masses. Had he voted to strike it down, Obama is probably riding high this very day.

Republicans like Rubio who want to fiddle with this atrocity are acting like fools. This whole mess needs to be repealed.

    smalltownoklahoman in reply to snopercod. | January 15, 2014 at 10:40 am

    Not only repealed but further protections put in place to ensure that another such law cannot be passed again. Should Obamacare ever be repealed I would greatly favor a Constitutional amendment that would prohibit the federal government (any and every part of it) from requiring american citizens to purchase a product or service against their will. The only exception I might make to that would be if the U.S. finds itself embroiled in a war with another NATION, not just fighting terrorists, drug cartels, or any assortment of smaller scale enemies. In such a situation I can see some justification for limiting citizens on what they can buy simply because fighting a war on that scale requires a lot of resources which could naturally make some products scarce for citizens for a while.

      While the requirement to purchase a certain product or service is bad enough, what makes it even worse is the government’s dictates for the precise features that product must have and the consequent price spike. This amounts to an attack on (or punishment of) millions of people who were already buying, straight from their own pockets, what the government says they must buy or else.

      Millions of us were already doing the responsible thing, spending many thousands to protect ourselves against risk, and the Democrats have put us in a much more difficult and/or riskier situation. It’s diabolical.

Didn’t Madoof hand out ‘bailouts’ to his clients to keep them quiet just a ltitle bit longer?

Midwest Rhino | January 15, 2014 at 9:20 am

Wilkow (on The Blaze) was talking of section 1332, which syndicated columnist Froma Harrop claims gives a lifeline to “single payer”, by providing federal funding to states to try “new innovations”. She says single payer groups in several states are now lining up to make use of THAT section.

It should be no surprise that the secretive minions that wrote this monstrosity were busy tucking away golden nuggets for the left to dig out later.

Of course Dem’s and RINO’s want all decisions and funding to run through DC, continuing to thwart decentralized government. Dictator types crave easy ability to choke funding to the resistant … the foot on the neck approach.

Coercion of the states through withholding of Medicaid funds was “outlawed” by SCOTUS in the ACA case, but perhaps that was just a Pyrrhic Roberts’ victory … I’m not clear how broadly it applies.

Barry’s thugs will keep doing everything possible to co-opt/preempt state power, whether through labor boards, EPA, IRS, the judiciary, or cleverly disguised portholes to hell, hidden in the morass of the ACA.

Government programs do not ‘go under’ due to financial unsustainability, especially if they provide entitlements in part or whole. Congress simply throws more money at it, regardless of party.

If Obamacare hits money problems, the GOP will say “we must repeal and replace!”, the Dems will say “the GOP wants dead babies! we must fund Obamacare!”, the media will ask every GOP-er they can find if they’ve quit beating their wives and the GOP will agree to fund Obamacare, promising to fight the next battle because, you know, they might lose this one and you should only fight battles you know you’ll win.

    Radegunda in reply to Henry Hawkins. | January 15, 2014 at 12:16 pm

    The GOP needs to follow with the true stories of people who died because they lost their insurance and the only available replacements either were unaffordable or didn’t cover their continuing treatment.

      Actually, we the Conservative People need to get behind conservative candidates with our money and time.
      Expecting the gop to do anything other than fight the conservative message seems pretty hopeless.
      This election spend a few hours one day a week on a phone bank, knocking on doors passing out literature or something else to help a conservative (yeah usually TEA party type) get elected.
      GOP already says they’re fight is with the TEA party with an aside that maybe they’ll run against democrats also.

        dinker in reply to 4fun. | January 15, 2014 at 4:07 pm

        You are correct—and boy am I going to be doing it this year!

        Mitch Mc Connell SAID that if GOP members took ANY monies from “TEA PARTY TYPES” they WOULD NOT get any GOP money–he supposed to be a GOPer! Thank God that he is up for reelection THIS YEAR and hopefully he’ll be GONE so that won’t affect the 2016 election! But how do the RINOs think GOPers can win with talk like that?!? Somebody needs to ask M. McC. just that question! These old foogies need to go and they should be thrilled to see such a good bunch of conservatives like Cruz-Gowdy-Lee-Jardon-Rubio-Gohmert-etc. and help them succeed–BUT NO–THEY AREN’T CONS. AND ARE SO AFRAID OF THIS NEW CROP TAKING THEIR PLACES THAT THEY ARE ACTING LIKE TRAITORS!
        LET’S GO GET UM!!

Obamacare ‘funding’:

The single biggest item on the list is the ~$500 Billion double counted from Medicare funding. $500 Billion that is being raised by Medicare tax, and will be spent by Medicare, is counted as funding for Obamacare. Asked in Congressional testimony about this, Sebelius answered the question on whether this $500 Billion will be spent on Medicare or Obamacare by saying “Both”. Yeah, that’ll work out well.

Another $75 Billion of the supposed funding came by including the CLASS Act as part of Obamacare. This was the long-term care for disabled seniors, or something. Anyway, it was so ridiculously underfunded that it has since been repealed. No longer exists.

Even with all the smoke and mirrors taken at face value, Obamacare never had more than about $1 trillion in funding (10 year time frame). Meanwhile, CBO estimates on the spending over 10 years has risen from a bit over $800 billion to $2.6 Trillion (in large part due to the fact that the first 4 years, now behind us, had trivial spending but full funding).

From the very beginning, the day they wrote the bill, a year before they passed it, it was know that once fully implemented they’d be spending about $260 billion a year with funding under $100 billion, and that most of that funding would never materialize.