Administration Still Bailing Insurers Out of Obamacare Exchanges

The Obama Administration refuses to concede defeat in its struggle to save Obamacare’s exchanges. The exchanges lost one quarter of their members in 2015. The Blue Cross Blue Shield Association has reported its insurance plans have enrolled people significantly sicker (and more expensive) than anticipated. Finally, UnitedHealth Group, the nation’s largest insurer, will drop out of most of the exchanges in which it is participating.

Desperate to induce insurers to continue participating in exchanges, the Administration suggested it would make illegal payments from “risk corridors,” a risk-mitigation mechanism that moves money between insurers to stabilize their profits in Obamacare’s first three years. Republicans in Congress put a stop to that in 2014. So, the Administration proposes apparently illegal payments from another risk-mitigation fund, called “reinsurance.”

Reinsurance is described in section 1341 of the Affordable Care Act, which directs the Secretary to collect $20 billion from insurers for the years 2014 through 2016. This $20 billion is then paid out to insurers which disproportionately enroll very expensive patients, according to calculations determined by the U.S. Secretary of Health & Human Services and the National Association of Insurance Commissioners.

The Secretary is also directed to figure out how much of the $20 billion each insurer is liable to pitch into the fund. This calculation is an appropriate item of rule-making. However, section 1341 also states the same calculation is used to raise another $5 billion from insurers over the same three-year period: $2 billion for 2014, $2 billion for 2015, and $1 billion for 2015.

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