I have already mentioned how it looks like Obamacare is putting health insurance companies at insane risk. While the companies are obviously hoping they will win big in the move (which is why I don’t have much pity for them) the possible downside looks really bad.
But what I didn’t realize (or remember) is that the Affordable Care Act itself acknowledges that the insurance companies might lose big. According to the American Thinker blog,
President Obama’s “fix” for those with cancelled policies may make it likely that insurance companies participating in the state exchanges will lose a boatload of money. The pool of healthy people who participate in the exchanges will be much smaller if those with cancelled individual policies are able to remain outside the exchanges. That means that next year, companies will be forced to radically increase insurance premiums – something state insurance boards are not likely to agree to. Hence, the probability that companies will suffer losses if they continue to offer policies on the exchanges.
Obamacare anticipates that possibility by funneling taxpayer dollars to insurance companies if their losses reach a certain level.
I have feared that there would be a bailout in the future without knowing about that provision in the law. As happened with the ugly and openly evil TARP, I am sure any business collapse will mean that politicians will preach to us how it is our civic duty to be robbed for the sake of the industry. But this provision will make the fight much harder to win. The bailout looters will claim they are “only following the law.”
But the American Thinker points out that Marco Rubio is proposing a law that would end that backstop that enslaves American taxpayers as a backup fund for an economically deadly law. According to the Washington Examiner:
Rubio spokesman Alex Conant said the Tea Party-aligned senator and potential 2016 presidential candidate is concerned that the fix Obama proposed would increase the likelihood that insurance companies would need a federal bailout. And the existing law would effectively give Obama a blank check to deal with it, he said.
“We need to protect taxpayers from having to bail out anyone as a consequence of Obamacare,” Conant said in an email exchange with the Washington Examiner. “Rubio’s bill will fully repeal the ‘risk corridor’ provision in Obamacare, preventing a bailout.”
From Politico we find out that the law gave bailout powers to Kathleen Sebelius. Conant also said, “[T]he current law gives the HHS Secretary broad authority in this area with no Congressional approval/oversight.”
First, the precedent set by Bush and Congress in giving control of all that money to Hank Paulson was a really toxic precedent.
Second, is Rubio hoping this law will pass? What I want to see is Republicans proposing this same law when they have the power to pass it.
Third, even without the bailout provision in the Obamacare law, there will be a real effort to create a bailout for the insurance industry. That must not happen. What we need is for medical prices and insurance prices to go through a deflationary bust so that we can start affording health care again. It will be painful, but it is the only way forward. Bailouts just allow the problems to get worse until there is a bigger crash.