I’ll admit to being a little frustrated with the Charles Krauthammer’s of the world who talk about ObamaCare self-destructing because it is financially “unsustainable”. This they also call the “death spiral” to describe the possible collapse of ObamaCare because the financial arrangements inherent within ObamaCare do not support it continuing.
Intellectually accurate. BUT, when you think about how current political progressives operate, PROFOUNDLY NAIVE and structurally false.
U.S. taxpayers will make up the difference between costs and revenues via the Reinsurance program:
[WSJ] Robert Laszewski—a prominent consultant to health insurance companies—recently wrote in a remarkably candid blog post that, while Obamacare is almost certain to cause insurance costs to skyrocket even higher than it already has, “insurers won’t be losing a lot of sleep over it.” How can this be? Because insurance companies won’t bear the cost of their own losses—at least not more than about a quarter of them. The other three-quarters will be borne by American taxpayers.
For some reason, President Obama hasn’t talked about this particular feature of his signature legislation. Indeed, it’s bad enough that Obamacare is projected by the Congressional Budget Office to funnel $1,071,000,000,000.00 (that’s $1.071 trillion) over the next decade (2014 to 2023) from American taxpayers, through Washington, to health insurance companies. It’s even worse that Obamacare is trying to coerce Americans into buying those same insurers’ product (although there are escape routes). It’s almost unbelievable that it will also subsidize those same insurers’ losses.
But that’s exactly what it will do—unless Republicans take action. As Laszewski explains, Obamacare contains a “Reinsurance Program that caps big claim costs for insurers (individual plans only).” He writes that “in 2014, 80% of individual costs between $45,000 and $250,000 are paid by the government [read: by taxpayers], for example.” (continue reading)
A second false aspect is that once the actual make-up of the insurance pool group is identified, and if the group has significant losses, the second year rates will jump dramatically when the analysis comes out in May of this year.
WRONG.
So long as the insurance companies are guaranteed payment and reimbursement from the taxpayer, why would they adjust rates to compensate for losses they will not incur?
Think about it.
Just like the trillion dollar 2009 stimulus bill became embedded in the baseline of all considered spending and analysis of every subsequent fiscal year, so too will insurance company reimbursement under Obamacare.
Actuaries can assemble an accurate picture of what rates “should be” in place absent of intervention or bailout – but so long as Democrats are in control, and President Obama is in the White House, and the Republicans are paid off by the U.S. Chamber of Commerce, and the taxpayer fills the gap between what “should be charged” and what “is charged” there’s no incentive to allow market principles to apply.
The health insurance company profits will be maintained just like GM, AIG, et al. It’s just another form of bailout to maintain a ruse of sustainability. But, try to remove it and everyone, Dems and Republicans, will come unglued because premium rates will increase and you’ll be attacking poor people, or something…
