By John R. Graham
The Obama Administration refuses to concede defeat in its struggle to save Obamacare’s exchanges. The exchanges lost one-quarter of their members in 2015. The Blue Cross Blue Shield Association has reported its insurance plans have enrolled people significantly sicker (and more expensive) than anticipated. Finally, UnitedHealth Group, the nation’s largest insurer, will drop out of most of the exchanges in which it is participating.
Desperate to induce insurers to continue participating in exchanges, the administration suggested it would make illegal payments from “risk corridors,” a risk-mitigation mechanism that moves money between insurers to stabilize their profits in Obamacare’s first three years. Republicans in Congress put a stop to that in 2014.
So, the administration proposes apparently illegal payments from another risk-mitigation fund, called “reinsurance.” Reinsurance is described in section 1341 of the Affordable Care Act, which directs the Secretary of Health & Human Services to collect $20 billion from insurers for the years 2014 through 2016. This $20 billion is then paid out to insurers that disproportionately enroll very expensive patients, according to calculations determined by the Secretary and the National Association of Insurance Commissioners.
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The Secretary is also directed to figure out how much of the $20 billion each insurer is liable to pitch into the fund. This calculation is an appropriate item of rule-making. However, section 1341 also states the same calculation is used to raise another $5 billion from insurers over the same three-year period: $2 billion for 2014, $2 billion for 2015, and $1 billion for 2015.
That money is supposed to go straight to the U.S. Treasury, not back to insurers via reinsurance. Guess what? In its rule, the Department of Health & Human Services stated it would only send half a billion dollars back to Treasury for 2014 and 2015, instead of the full $4 billion.
One politician, U.S. Senator Ben Sasse (R-NE), is holding Health & Human Services accountable for sending $3.5 billion of taxpayers’ money back to health insurers. In the scheme of Obamacare, $3.5 billion is not a lot of money. Its misdirection by the administration to health insurers shows how worried Obamacare’s architects are about insurers staying onboard.
This article was originally published by the Independent Institute‘s Blog The Beacon.