Monday, May 25, 2015

Big Insurance Cartel Expecting Obamacare Bailout

The best way a handful of businesses in any given industry can guarantee profits, marginalize competitors, and bailout their mismanaged company is to become a government sponsored cartel.  We’ve seen this “most favored” status conferred upon select banks, auto makers, and various businesses that know how to milk the government teat.  Their names need not be listed.  We all know who they are.

The health insurance industry has become the next “too big to fail” government sponsored cartel and Obamacare is the vehicle for which a handful of businesses will shelter themselves from a massive failure with the expectation that taxpayers will bail them out.

The handwriting is on the wall.  Performance is not meeting expectations.  This means massive increases in premiums.  Big insurance knew this was coming, as well as their enablers in Washington D.C. 

The Washington Examiner reported the following:

This is an ominous sign for the future of Obamacare, because two federal programs that were supposed to act as training wheels for insurers in the early years of Obamacare by absorbing excess risk are set to expire after 2016. If insurers don't do a better job of attracting a healthier risk pool, 2017 promises to be a rocky year for insurance markets, regardless of which party is in control of the White House.

In the first two years of the implementation of Obamacare's insurance exchanges (2014 and 2015), insurers set rates with the expectation that the government would absorb a certain degree of risk and they made assumptions about the medical costs of their enrollees.

And here comes the rub:

In a scenario in which there are massive industry-wide losses (and thus there isn't enough money being raised by the program to make it self-sustaining), Republicans argued that the program would take on the characteristics of an open-ended taxpayer bailout.

At first, the administration said the program would be budget neutral – meaning it would only make payments to insurers up to the amount that was collected from other insurers. But that led to a furious backlash from insurers last spring, as lobbyists and company executives warned of serious rate hikes for policies starting in 2015 unless they were given added reassurance that the federal money would continue to flow

Now that insurers have had more time to look at the claims coming in from those enrolling from Obamacare, they're finding that the pool of customers is older and sicker than originally projected, driving up medical costs. Meanwhile, federal help isn't what they anticipated.

Or, do they?  Does anyone truly believe Washington D.C. is going to let this government program fail?


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