Knowing I’ve been both a critic of insurance company practices and a supporter of efforts to reform the industry, a FOX news producer reached out last week to get my take on accusations by conservatives that Obamacare will actually result in a bailout of big insurance companies.
Under the headline, “Bailing Out Health Insurers and Helping Obamacare,” The Weekly Standard on Monday urged Republicans to insist that future debt ceiling increases contain a no-bailout provision. The magazine also cited Sen. Marco Rubio’s, R-Fla., bill to repeal a provision of the Affordable Care Act designed to limit potential initial losses of insurers selling policies on the new health insurance exchanges.
I reminded the FOX producer that Republicans have been supporting — and vigorously defending — a much more expensive transfer of taxpayer dollars to private insurers than the one Obamacare foes are now concerned about.
Here’s the issue:
Lawmakers who drafted the Affordable Care Act knew that insurers would be reluctant to participate in the new health insurance exchanges — also called marketplaces — if the government didn’t create a temporary program to protect them against what’s known in the insurance world as adverse selection.
Insurers were concerned, for good reason, that the first people to sign up for coverage through the exchanges would be folks previously shut out of the insurance market — people who were older and sicker than the population at large. Those people couldn’t afford to buy coverage previously because insurers were able to charge them far more than younger, healthier people.
In many cases, insurers refused to sell coverage at any price to prospective customers with preexisting conditions. That’s a big reason why the number of uninsured Americans had reached nearly 50 million when Congress passed the reform law.
So it wasn’t the least bit surprising that the first few million who have signed up for coverage since the exchanges opened on Oct. 1 skew older than many expected. People who have been denied coverage for years are far more motivated to get insurance — and fast — than anyone else. There is not the same pent up demand among the young and healthy.
In anticipation of this, drafters of the reform law established a $25 billion risk fund to insulate insurers from big losses during the first three years. Although the risk fund has always been in the law, conservative pundits apparently just became aware of it.
Yes, $25 billion is a lot of money, but it is pocket change compared to the enormous amount of taxpayer dollars that have been flowing to private insurance companies for nearly three decades to keep them in the Medicare Advantage program, which has had the unwavering support of Republicans.
Republicans have long supported efforts to privatize Medicare, and the Medicare Advantage program is one of the ways they’ve tried to do it. Medicare Advantage is billed as a private alternative to traditional Medicare. When Americans reach 65, they can enroll in traditional Medicare or in a private plan operated by an insurer. If they opt for a private plan, the federal government still picks up the tab and transfers money to the private insurer every month.
As the U.S. Government Accountability Office explains it, the Centers for Medicare and Medicaid Services (CMS) adjusts the monthly payments it sends to private insurers to account for each beneficiary’s health status. As part of this risk adjustment process, CMS assigns each Medicare Advantage beneficiary a risk score — “a relative measure of expected health care costs,” as the GAO puts it.