President Obama's failed health insurance website may force health insurers to cover a much smaller and much sicker population than they originally planned, but don't cry for the insurance companies yet.
A key loophole in Obamacare will leave taxpayers footing the bill for Obamacare's failure, while the health insurance companies are guaranteed to come away unscathed. Adrianna McIntyre explains:
Risk corridors will play the biggest role if the individual mandate does get delayed. Their entire purpose is to stabilize premiums during the first three years of Obamacare, when it’s especially difficult for insurers to price plans.
Here’s how it works: exchange plans (QHPs) projected how much their risk pool would cost overall in 2014, their “target” cost. If they’ve significantly miscalculated—or, say, if a mandate delay causes adverse selection that they couldn’t have predicted—HHS will take action.
And by "take action" McIntyre means cut checks to insurers. In other words, if the actual cost of providing health care for the people who sign up for Obamacare is more expensive than the insurance companies thought it would be, then HHS will pay insurers the difference. They can't lose!
And where will HHS get this money?
Well, the CBO scored the risk corridor program as budget neutral when Obamacare passed, reasoning that while some insurers would underestimate cots, others would overestimate them, and the overestimaters would be forced to pay the difference to HHS. CBO just figured the overestimaters and the underestimaters would cancel each other out.
But if everyone underestimated the cost of insuring people through Obamacare, then the money to cover insurance company losses will come straight from taxpayers. It could be the biggest taxpayer bailout of the insurance industry ever.
The health insurance industry didn't spend $100 million lobbying for Obamacare so they would lose money on the program. Taxpayers are going to be left holding the bag.