Marco Rubio Outsmarts Obama Administration; Oregon Health Insurers Face Heavy Losses

Update: Senator Rubio was not a major or even an important player in this. The real heroes are Senator Jeff Sessions (R-Ala.), and Representative Fred Upton (R-Mich.) and then-Representative Jack Kingston (R-Ga.).
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Senator Marco Rubio added a provision to last year's spending law that requires all payments to overspending Obamacare health insurers come from money other health insurers pay in for not spending as much as they thought they would rather than from taxpayers.

The risk corridors program takes from health insurers who spend less than 97% of what they thought they would spend on "allowable costs" and gives that to health insurers who spend more than 103% of what they thought they would spend on "allowable costs".

The Obama administration assumed that insurers would make enough money with young, healthy people forced by law to pay for health care they previously did not buy to cover the influx of previously uninsured sick people. To assure this outcome they enrolled millions of people in "free" Medicaid plans funded by taking more than half a trillion dollars from Medicare.

That hasn't worked. At least the amount healthy people have paid in has not offset the amount insurers have had to pay out. In fact, the balance is so skewed that about 2/3rds of insurers are asking for $2.9 billion in help to make up for losses.

From the New York Times:

A little-noticed health care provision that Senator Marco Rubio of Florida slipped into a giant spending law last year has tangled up the Obama administration, sent tremors through health insurance markets and rattled confidence in the durability of President Obama’s signature health law.
. . .
Mr. Rubio’s efforts against the so-called risk corridor provision of the health law has hardly risen to the forefront of the race for the Republican presidential nomination, but his plan limiting how much the government can spend to protect insurance companies against financial losses has shown the effectiveness of quiet legislative sabotage. 

The risk corridors were intended to help some insurance companies if they ended up with too many new sick people on their rolls and too little cash from premiums to cover their medical bills in the first three years under the health law. But because of Mr. Rubio’s efforts, the administration says it will pay only 13 percent of what insurance companies were expecting to receive this year. The payments were supposed to help insurers cope with the risks they assumed when they decided to participate in the law’s new insurance marketplaces.

The Obama administration didn't try to stop Rubio's funding limitation because Department of Health and Human Services (HHS) officials believed its own promises. HHS really thought that lots more money would roll in from healthy people than would go out for sick people. Profits seemed especially likely considering the high co-pays, massive deductibles and big out-of-pocket payments Obamacare allowed. All those didn't make more than a 13%  ($362 million) dent in the $2.9 billion subsidy need. It just shows that what you believe to be true can blind you to the realities you are really facing.

Kind of funny is the complaint from an Oregon insurer forced out of business:

“Risk corridors have become a political football,” said Dawn H. Bonder, the president and chief executive of Health Republic of Oregon, an insurance co-op that announced in October it would close its doors after learning that it would receive only $995,000 of the $7.9 million it had expected from the government. “We were stable, had a growing membership and could have been successful if we had received those payments. We relied on the payments in pricing our plans, but the government reneged on its promise. I am disgusted.”

Funny, first of all because Health Republic of Oregon got a $59 million dollar interest free loan from the federal government for its start up. Guess that won't be paid back.

Second, before Ms. Bonder was disgusted with government reneging on its promise, millions of Americans were disgusted by President Obama not keeping his promise that "if you like your healthcare plan, you can keep your healthcare plan", not to mention that each family would see a drop in health insurance premiums of up to $2,500 per year. Actually, Ms. Bonder was a part of reneging on those two promises to the American public. Her co-op didn't offer family plans $2,500 less than the previous average despite receiving $59 million in interest free dollars. Nor, of course, did Health Republic of Oregon offer plans that would allow people who liked their previous plans to buy a similar plan through Health Republic of Oregon.

Health Republic of Oregon was one of seven Oregon health insurers to ask for a reimbursement. Only Providence, Bridgespan, Kaiser, and Trillium* paid less out than they thought and will have to pay for doing that. Oregon's stats: 10 health insurers, losing $107.5 million, with $1.1 million coming in from 5 insurers to cover that.

source: https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/RC-Issuer-level-Report.pdf

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*Community Care of Oregon has to pay $53,500 for its small group care plans, but that was dwarfed by its $1.5 million loss in individual plans.

H/T Byron York, American Thinker and Health Affairs Blog