On The Other Hand: Insurers May Be Bearing a Lot More Risk than They Think
According to Chris Jacobs of America Next:
As insurers submit bids for the 2015 open-enrollment season, media reports have trumpeted increased participation by carriers on several health exchanges. Depending on the legal and judicial interpretations of two important issues, those insurance companies may end up getting much more than they bargained for.
The first issue involves the temporary “risk corridor” provision in ObamaCare, under which plans with enrollees who are healthier than average pay into a pool that subsidizes plans whose enrollees are unhealthier than average.
Does the Obama administration have the authority to implement this provision? A January memo from the Congressional Research Service raises doubts.
But that’s not the only potential pitfall for carriers: They could also end up on the hook for payment reductions caused by sequestration.
And while the premium subsidies are structured in a way that should exempt them from the budget sequester, the cost-sharing subsidies are not.
The bottom line: The nonpartisan Congressional Research Service warned in May 2013 that insurers could be on the hook to absorb the billions of dollars in sequester cuts to the cost-sharing subsidies. As with the “risk corridor” provision of ObamaCare, insurers participating under the assumption that these legal questions will be easily resolved may be doing so at their own risk.
I was not aware that the cost-sharing subsidies were subject to sequestration cuts. I had never really thought about it, but that certainly makes it more risky for insurers selling through the exchange.
Imagine those cuts being implemented. The very fabric of ObamaCare will collapse.
This administration is so dead set on making ObamaCare work, I think cost sharing subsidies would be the very last thing they choose to cut.
I wish someone/anyone would get this right. The risk adjustment NOT RISK CORRIDO is mechanism under which plans with enrollees who are healthier than average pay into a pool that subsidizes plans whose enrollees are unhealthier than average. And it is not temporary.
In contrast, the risk corridor is temporary and is for plans that profits or losses are out of a corridor. It has nothing to do with the mix of healthy enrollees. If the company priced too high or too low for any reason.
We’ve got it right on this blog. I think Mr. Jacobs has it right to (because I’ve spoken about it with him) but the sentence he uses to describe it here would better describe the risk adjustment, not risk corridors, as you state.
Ed Haislmaier of the Heritage Foundation put it perfectly when he described risk corridors as a P&L backstop, not a risk-mitigation measure.
There is no doubt that insurers are getting crushed by Obamacare. This, of course, will lead to more expensive plans, if those companies even survive to begin with. Hence, costs rise. Obamacare subsidy recipients won’t mind because their out-of-pocket costs will not reflect those true costs.
But the taxpayers will.
http://healthblog.ncpathinktank.org/75-percent-of-obamacare-premiums-are-paid-by-taxpayers-not-enrollees/
As long as they are getting their share from the taxpayers, insurers are doing alright. Taxpayers bear all the costs while recipients get all the benefits.
Well there is no free lunch…
So the sequestration cuts end up hurting insurance companies huh? Funny how these “indiscriminant cuts” seem to have been designed to inflict the most pain and annoyance on the American people.
Well it is the American taxpayers that bear all of the costs in this country.
If sequester cuts ever happen to insurance subsidies, ObamaCare instantly falls apart. No one will pay full price for their bogus insurance plans.