Thanks Obamacare – Another Insurance Company Bailout Expected in 2015

By Joshua Cook

To cover losses from Obamacare, insurance companies like WellPoint and Humana are expected to receive $5.5 billion next year in a move Affordable Care Act opponents are calling another “bailout.”

The money is designated to help insurers who find the cost of the law higher than expected, based on the percentage of older, sicker people who enrolled compared to the younger enrolled who were expected to help cover that cost. President Barack Obama outlined the plan in part of his proposed budget for the fiscal year that begins in October.

“If you want to insure the uninsured, and you want to set up a competitive marketplace and drive health-system improvement, you’re not going to do that without off-loading some of the risk for insurance providers,” Dan Mendelson, the president of Avalere Health, a Washington consulting firm, said in a telephone interview with Bloomberg News.

Under the Patient Protection and Affordable Care Act, insurers who record a profit of 3 percent or more on their Obamacare business would put some of the gains into a government-controlled fund. Companies whose claims cost at least 3 percent more than their premium revenue can access the money.

The risk corridors program, labeled as a bailout by ACA opponents, was adopted from earlier federal health programs that rely on private insurers, including Medicare’s prescription drug benefit. It was designed to protect insurers temporarily while the new health program is introduced and expires after 2016.

“The risk of a bailout has always been high,” Senator Marco Rubio, a Florida Republican, said at a Feb. 5 hearing. “As many of us predicted, these exchanges have not attracted enough young and healthy people to sign up.”

One insurer, Humana, based in Louisville, Kentucky, plans to dip into the funding pool.

Rubio said Obama increased the likelihood of the program costing taxpayers when the president announced a policy last fall to allow healthy people to keep their existing insurance plans. About 2.6 million Americans received cancellation letters from their insurance carriers at the end of 2014, according to a study published online by the journal Health Affairs and reported by Bloomberg News.