Wednesday, December 09, 2015

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.).

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.
*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 YorkAmerican Thinker and Health Affairs Blog


MAX Redline said...

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

They shot that down when they insisted that "kids" could remain covered under Mom&Dad's plan until age 27 - so there's no "young & healthy" money going in. Even if there were, there are far more ageing people in the USA than there are "young & healthy".

Obamacare was planned to implode from the start.

T. D. said...

Right, they foolishly did away with 9 years of youth premiums. Sometimes you can give away the store.

Do you think they thought it would be an easy pivot to a single payer system? They didn't consider the negative opinion of government healthcare would grow as people encountered the disaster of Obamacare?

What did you think of Oregon's healthcare plans mostly failing? Especially Moda with an $86 million shortfall?

MAX Redline said...

Yes, they gave away the store, as you so aptly put it. When I saw that "stay on Mom & Dad's plan" part, it was obvious that they'd crafted the thing to fail - yet another of the many lies associated with this mess.

I think it was planned all along to move into a V.A.-style government-run health "care" system.

Moda had $40 million that they figured they could spend to buy naming rights to a sports arena; they screwed up. And that's part of why they're out of Washington and California. As for the co-ops - they were set up to fail.

T. D. said...

Max, do you think they just overlooked that if their system failed even more people would turn against the idea of government health care? Or they thought that Medicaid expansion would require a government system?

MAX Redline said...

My view is that they wanted to implode the system, TD, because they assumed that the panicked masses would flock to a government-run health program. Unfortunately, the problems associated with the V.A. program started gaining the attention of some folks who would kind of like to not die while waiting for treatment, which sort of threw a wrench into the works.

TD said...

Yep, the VA hospital scandal has not been such a good advertisement for single payer systems.

I was just thinking, you remember that Oregon made Kaiser and Providence raise their premiums 10% for 2016 so that Moda wouldn't be left so far out in the cold with its giant 26% hike ( Well, this means Kaiser and Providence will either have to up their spending on patient care or pay that 10% hike into the HHS coffers to underwrite the losers like Moda. So Kaiser and Providence customers are being forced to pay higher rates which must be spent or sent to Federal coffers.

MAX Redline said...

you remember that Oregon made Kaiser and Providence raise their premiums 10% for 2016

You bet, but it wasn't just to bail out Moda, as the Co-ops are shutting down as well. Kaiser actually wanted to reduce premiums by 2%, but the State made them raise the cost instead. Moda had to get out of Washington and California, which they'd only recently been infiltrating (Moda used to be ODS - Oregon Dental Service). Their expansion plans and $40 million branding contract have gone south, and the State idiots have been trying to prop them up.

T. D. said...

Moda/ODS is pretty much swirling down the drain. Interesting that Regence BlueCross is not listed on the Federal list of insurers for Oregon even though they have an individual coverage market share about equal to Providence's.