May 20, 2014

ObamaCare’s Busted Subsidies and Promised Redistribution

One million wrong subsidies, plus the “risk corridor” bailout plan for insurance companies.

ObamaCare’s latest troubles include a significant discrepancy over health care subsidies. It appears some one million of the eight million people who signed up for coverage are receiving an incorrect level of government subsidies. That level is either too high or too low, and there is not yet a concrete way of knowing how many are on which side. The subsidies are really taxpayer handouts to people who qualify for ObamaCare but fall into income brackets below a predetermined level set by the law.

The million or so discrepancies result from incomes reported when signing up that differ from what the IRS has on file. There is an audit process, but it’s slow because the main focus since last October has been fixing all the consumer-facing sign-up issues in the federal exchange – a job that is far from over. The current workaround for auditing the subsidies is manual, and it will remain so until at least September. It may even get pushed back then, since there’s now an issue of a million or so applicants who may have citizenship issues. All told, about three million applications have some kind of inconsistency that must be manually addressed.

The fun doesn’t stop there. The Obama administration claims that the so-called “risk corridors” will continue to function even if new sources of revenue have to be drummed up to make them work. Risk corridors are really just a fancy name for profit redistribution. Insurance companies that make less than expected on their premiums will be subsidized (there’s that word again) by money taken from insurance companies that do better than expected. This is ObamaCare’s plan for managing premium costs because the law’s creators knew that insurance was going to get more expensive, even as they repeatedly told the American people that it would not.

The risk corridors are supposed to remain “budget neutral,” so rather than taxpayers having to pick up the tab for an insurance industry bailout, insurance companies that do well would be punished by losing revenue to keep faltering companies afloat. However, a recent report by the Centers for Medicare and Medicaid Services stated that uncertainties in the market cannot guarantee a budget neutral risk corridor program, and “in that event, [Health and Human Services] will use other sources of funding for the risk corridor payments, subject to the availability of appropriations.”

This can only mean one thing: more taxes and fees heaped on the public on top of their skyrocketing health care and insurance costs. Can someone please explain again how exactly ObamaCare is supposed to be good for the country?

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