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October 15, 2015

ObamaCare’s Premium Results

Premiums up, co-ops collapsing and no improvement in sight.

As we all know, with the creation of ObamaCare we were told if you liked your insurance policy and doctor you could keep them. Those broken promises were just the tip of the iceberg. As we detailed a few months back, next year consumers could see premium increases of as much as 51%. But the bad news isn’t limited to premium increases.

In several states, most recently Kentucky, the insurance co-ops set up to enhance the market — at the cost of billions of federal dollars in seed money — are going belly-up. “Things have [financially] come up short of where they need to be,” wrote Kentucky Health Cooperative CEO Glenn Jennings in a statement to participants. The co-op’s demise was blamed on lower-than-expected risk corridor payments. Other states where co-ops have failed include Louisiana, Nevada, Iowa and New York, which was the nation’s largest.

And those likely won’t be the last. Eleven other co-ops are on an “enhanced oversight” financial probation, meaning out of 23 co-ops chartered just two years ago, a sizeable majority are facing financial difficulties. Taxpayers will be left holding the bag.

The concept of risk corridors was envisioned as one of three legs of the stool supporting ObamaCare from the insurers’ standpoint. Risk corridors, in essence, were intended to “stabilize” (read: compensate for overregulating) the market. Insurers that made a profit of more than 3% would remit an increasing share of those excess profits into a fund designed to compensate those that lost money — the more money lost, the higher the subsidy. This works in tandem with a risk adjustment program that directly shifted funds from insurers that had more healthy risk pools to ones that had sicker customers. Finally, a reinsurance program provides direct subsidies to insurers who have people with high medical expenses.

So, in essence, a back-door single-payer system without calling it such.

Only the risk adjustment program was intended to be permanent, with the others expiring after 2016. More importantly, as part of the CRomnibus spending bill last year, Congress added a provision to the risk corridor program making it revenue-neutral. Losing that blank check made it impossible for some of the weaker co-ops to continue because the profitable insurers are far outnumbered by the money losers.

The demise of these co-ops, combined with an ever-shrinking number of insurers willing to risk their bottom line, leaves thousands in an insurance limbo as their carriers fail or leave the market. Some Americans, like columnist Michelle Malkin, are facing this situation for the second time since ObamaCare took full effect, as their insurance plans got canceled. Then again, if you’re running a company losing 12 cents on the dollar as calculated by researcher Brian Blase at the Mercatus Center at George Mason University, that’s usually an indication the market is a failure.

Neither forcing people to search for new insurance during the busy open enrollment season nor forcing them to cut family budgets for the next double-digit premium increase rank high on the political popularity list. You may recall open enrollment for 2015 was pushed back to begin after the 2014 election; a move the Obama administration claimed would give consumers more time to evaluate plans while cynics made the case that it was to push the sticker shock safely past the midterms. With the provisions for insurers ending after 2016, Barack Obama’s successor will have to deal with the fallout. To minimize the damage to Democrats in the 2016 elections, they will probably dupe Republican “leaders” into a one-year extension on the risk corridors and reinsurance.

It’s now legacy time for Obama. We contend he will be remembered as the man who destroyed American health care by wiping out a system that worked reasonably well and satisfied the overwhelming majority of Americans for decades, all to make the bulk of new enrollees dependent on the government through Medicaid. That’s one to tell the grandkids.

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