Cost of the Bailouts
Humana announced that it expects to tap the three risk adjustment mechanisms in ObamaCare for between $250 and $450 million in 2014. This amounts to about 25 percent of the insurer’s expected exchange revenue. This money is needed to offset losses that the insurer will take as a result of slower enrollment in its ObamaCare plans, and a skewed risk pool that weighs more heavily toward older and less healthy members than it originally budgeted.
More than half of the money will come from the $25 billion reinsurance pool that ObamaCare provides (collected through a tax on employer-sponsored health plans). The other half will come mostly from the risk corridors.
It is also a balance issue. In fact, Obamacare is a kind of artificial financial retrenchment that largely undermines the liquidity leading to lower economic activity.
And when everyone starts doing this, likely for more than was projected, we’ll be paying even more…
More and more. Just what obama likes to here. It’s the only way to continue to grow the government
…”a skewed risk pool that weighs more heavily toward older and less healthy members than it originally budgeted”
Shouldn’t budgeting for things like that be priority number 1?
It would be, in a system that makes sense.
Or one where people could put aside party and egos and actually make laws that function properly.
Good budgets can be based on rational, reality-based expectations – but not on wishful thinking.
Reality tends to bite very hard when budgets are no better than make-a-wish documents.
I think people who can manage understand these things. Politicians will always say they understand them, too . . . but politicians still end up mistaking politics for reality, and substituting wishes for rational expectations.
Get your popcorn, grab a good seat, this show has hardly begun.
“This money is needed to offset losses that the insurer will take as a result of slower enrollment in its ObamaCare plans, and a skewed risk pool that weighs more heavily toward older and less healthy members than it originally budgeted.”
It’s already begun
The losses associated with the slow rollout could be far more extreme.
I can’t wait for the numbers to come back on that one.
It’s not a bailout. It’s creative accounting.
I think that’s what Enron said, too.
“25 billion dollar reinsurance pool” sounds an awful lot like bailout to me. But hey, what do I know.
Of course it is. They government just changes the name
“The company blamed the Obama Administration’s decision late last year to extend grandfathering of individual market plans for the overall deterioration in the risk pool.”
The continuous policy changes are destroying our insurance companies
And the people who need to buy insurance
If most insurers have underbid their exchange premiums by 25%, the exchanges will possibly collapse. Raising premiums by 25% would induce young, healthy people drop out — which would precipitate another round of premium increases causing a subsequent round of healthy drops. In insurance industry parlance, this is what’s known as the adverse selection death spiral.
“adverse selection death spiral.”
That is exactly right.
“Only 20 percent of enrollees are below the age of 30,while 42 percent are aged 50-64. This is consistent with earlier estimates put out by the Federal government, which suggests that the demographic mix is largely unchanged”
So…we’re still having the same problem as before?
Exactly. Even as more people enroll, it looks like the ratios are largely staying the same.
Connor’s point about how grandfathering hurts the exchange pool may be true, but it is quite depressing.
The implication is that the only way for the exchanges to succeed is by kicking individual policy holders off of plans that they like. Sort of like the Russian army feeding young soldiers to the Nazis to buy time for a counter attack.
(well, not that brutal but still pretty ugly.)
When Gruber and Cutler and others were proposing the exchanges, I read and understood that there had to be a mandate to bring in the young uninsureds.
I was NOT aware that existing individual insureds had to be dragooned in to help the exchange make its numbers.