So long, Obamacare?
Thursday, Trump issued an Executive Order directing federal agencies to draft new regulations allowing employers to form insurance offerings across state lines. Many contend opening up the marketplace will allow more employer flexibility, greater choice, and as a result, lower premiums.
Before the ink had dried, a leaked report indicated Trump’s plans to throw another blow at Obamacare, this time, by way of subsidy.
Congress has yet to appropriate funds for subsidies given to health insurance providers that offer Obamacare plans. Failure to subsidize these plans spells the end of Obamacare as we know it.
BREAKING: White House says it cannot lawfully pay subsidies to health insurance companies under President Obama's health care law.
— The Associated Press (@AP) October 13, 2017
The subsidies, which are worth an estimated $7 billion this year and are paid out in monthly installments, may stop almost immediately since Congress hasn’t appropriated funding for the program.
The decision, which leaked out only hours after Trump signed an executive order calling for new regulations to encourage cheap, loosely regulated health plans – delivered a double whammy to Obamacare after months of failed GOP efforts to repeal the law. With open enrollment for the 2018 plan year set to launch in two weeks, the moves seem aimed at dismantling the law through executive actions.
Press Secretary Sarah Huckabee Sanders confirmed the decision in a statement emailed to reporters at 10:47 p.m. Thursday.
“Based on guidance from the Department of Justice, the Department of Health and Human Services has concluded that there is no appropriation for cost-sharing reduction payments to insurance companies under Obamacare,” she said. “In light of this analysis, the Government cannot lawfully make the cost-sharing reduction payments. …The bailout of insurance companies through these unlawful payments is yet another example of how the previous administration abused taxpayer dollars and skirted the law to prop up a broken system.”
About 7 million Americans receive a subsidy for their health insurance purchased through an Obamacare exchange.
Insurance companies participating in Obamacare exchanged have been losing copious amounts of cash, which is why exchanges have collapsed as insurers continue their mass exodus into more profitable ventures. Participating insurers have received bailout after bailout by way of subsidy from the federal government to offset loss incurred by selling Obamacare plans.
When Trump floated yanking subsidies last spring, speculation suggested insurers would pass that cost on to the rest of the insurance pool, effectively raising premiums across the board. So it makes sense that Trump would first create a mechanism for the market to find cheaper alternatives (Thursday’s Executive Order) before cutting insurers off the government dole.
Lost in the fear-mongering about sweeping premium increases is how much every tax payer has been involuntarily feeding participating insurers through these Obama-era federal bailouts.
From a post in The Weekly Standard in 2014; a bit lengthy but necessary:
Because insurance companies won’t bear the cost of their own losses—at least not more than about a quarter of them. The other three-quarters will be borne by American taxpayers.
For some reason, President Obama hasn’t talked about this particular feature of his signature legislation. Indeed, it’s bad enough that Obamacare is projected by the Congressional Budget Office to funnel $1,071,000,000,000.00 (that’s $1.071 trillion) over the next decade (2014 to 2023) from American taxpayers, through Washington, to health insurance companies. It’s even worse that Obamacare is trying to coerce Americans into buying those same insurers’ product (although there are escape routes). It’s almost unbelievable that it will also subsidize those same insurers’ losses.
But that’s exactly what it will do—unless Republicans take action. As Laszewski explains, Obamacare contains a “Reinsurance Program that caps big claim costs for insurers (individual plans only).” He writes that “in 2014, 80% of individual costs between $45,000 and $250,000 are paid by the government [read: by taxpayers], for example.”
In other words, insurance purchased through Obamacare’s government-run exchanges isn’t even full-fledged private insurance; rather, it’s a sort of private-public hybrid. Private insurance companies pay for costs below $45,000, then taxpayers generously pick up the tab—a tab that their president hasn’t ever bothered to tell them he has opened up on their behalf—for four-fifths of the next $200,000-plus worth of costs. In this way, and so many others, Obamacare takes a major step toward the government monopoly over American medicine (“single payer”) that liberals drool about in their sleep.
Laszewski adds, “The reinsurance program has done and will continue to do what it was intended to do; help attract and keep more carriers in Obamacare than might have otherwise come.” Thus, Obamacare is being aided by having taxpayers subsidize big insurance companies’ business expenses. (Who could ever have guessed that big government and big business might be natural allies?)
But, amazingly, it doesn’t stop there. Laszewski writes that Obamacare also contains a “Risk Corridor Program that limits overall losses for insurers.” So insurers not only don’t have to pay out all of their costs; they also don’t have to swallow all of their losses.
Laszewski explains that if an insurance company expects its costs in a given year to be X, and those costs end up being more than X plus 2 percent, taxpayers will come to that insurance company’s rescue—thanks to Obamacare. In fact, once an insurance company covers that initial 2 percent in unexpected costs, taxpayers will cover at least 80 percent of any additional costs the insurer accrues.
As mentioned above, every person contributing to the federal tax coffers is already paying to offset the loss of a failing market, artificially propped up by government stilts. Removing them will create temporary uncertainty as the market adjusts, but there’s no reason (aside from politicalization of the issue) to believe anyone will die or health insurance will be unaffordable because of Trump’s recent decisions. Quite the contrary.
This is far better a result than anything Congress has coughed up this year. Which means I fully expect the entire internet to light its hair on fire while Democrats launch full-scale lawfare.
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