The Insurance Bailout is Here!

The L.A. Times announced it by reporting that conservatives were “calling it a bailout.”

Right, because when you are confronted by a government giving taxpayer money to an industry that might otherwise go bankrupt, it is really a matter of debate as to whether such an action counts as “a bailout.”

The Obama administration has quietly adjusted key provisions of its signature healthcare law to potentially make billions of additional taxpayer dollars available to the insurance industry if companies providing coverage through the Affordable Care Act lose money.

The move was buried in hundreds of pages of new regulations issued late last week. It comes as part of an intensive administration effort to hold down premium increases for next year, a top priority for the White House as the rates will be announced ahead of this fall’s congressional elections.

Administration officials for months have denied charges by opponents that they plan a “bailout” for insurance companies providing coverage under the healthcare law.

They continue to argue that most insurers shouldn’t need to substantially increase premiums because safeguards in the healthcare law will protect them over the next several years.

But the change in regulations essentially provides insurers with another backup: If they keep rate increases modest over the next couple of years but lose money, the administration will tap federal funds as needed to cover shortfalls.

We have, of course, seen this coming. In the first place, it was completely foreseeable because Obamacare might not pay off at all for health insurance companies. Furthermore, back in early December Fox News discovered and reported on a plan to bail out health insurance companies. In January, we got more news indicating a bailout was planned.

So if this bailout is not necessary, why would the Obama Administration begin to set it up? Obviously, it is politically problematic to try to sneak bailout provisions into the regulations. They wouldn’t have done it if they didn’t have to.

As insurance companies see how much money they are required to pay out they are going to want to raise rates to recover their losses. This means there could be a great deal of financial pain for many Americans before the 2014 November election. Obviously, Obama wants to find some way to stop the insurance losses so that the companies don’t have to raise their rates.

In a series of White House meetings over the last several months, Obama and other senior administration officials have sought to persuade insurance company CEOs to nonetheless hold rates in check, arguing that the marketplaces would stabilize over time.

But with proposed 2015 rates beginning to come in, the administration acceded to industry demands for a clear guarantee that more money would be available to cover potential losses.

“In the unlikely event of a shortfall for the 2015 program year, HHS recognizes that the Affordable Care Act requires the secretary to make full payments to issuers,” the regulation published Friday notes. “In that event, HHS will use other sources of funding for the risk corridor payments, subject to the availability of appropriations.”

That language allows the administration to tap funds appropriated for other health programs to supplement payments to insurers, according to administration and industry officials.

If the event was so unlikely, then the regulation would never have been published. The insurance companies would not have demanded it.