Taxpayers on the Hook as Obamacare Exchanges Near the Edge of Collapse

By Phil Kerpen | August 12, 2016 | 4:08 PM EDT

(AP Photo)

The health insurance exchanges that are the beating heart of Obamacare are on the edge of collapse, with premiums rising sharply for ever narrower provider networks, non-profit health co-ops shuttering their doors, and even the biggest insurance companies heading for the exits amid mounting losses.  Even the liberal Capitol Hill newspaper is warning of a possible “Obamacare meltdown” this fall. 

Three states – Alaska, Alabama, and Wyoming – are already down to just a single insurance company, as are large parts of several other states, totaling at least 664 counties.

UnitedHealth is pulling out completely, Humana is pulling out of 88 percent of counties it was in, and last weak Aetna strongly suggested it will be exiting, too, unless it gets bribed to stay with a huge, annual infusion of direct corporate bailout payments from taxpayers.

Dealing with the wreckage will be at the top of the agenda for the new president and Congress next year, and their options will be limited – especially if, as appears likely, we will continue to have divided government.  Most Democrats would prefer moving toward a totally government-run system while Republicans continue to favor repeal.

The most likely outcome, then, is the muddled middle, keeping gravely ill Obamacare on life support, with the major policy fight being over the extent to which taxpayers should be forced to provide billions in direct corporate bailout cash infusions.

Aetna CEO Mark Bertolini was pretty blatant in a recent interview with Zachary Tracer of Bloomberg

Here’s the key part:

“Rather than transferring money among insurers, the law should be changed to subsidize insurers with government funds, Bertolini said. ‘It needs to be a non-zero sum pool in order to fix it,’ Bertolini said. Right now, insurers ‘that are less worse off  pay for those that are worse off.’”

In other words: everybody is losing money, so taxpayers need to pick up the tab.

The Obama administration is already playing fast and loose with the law to shovel as many bailout bucks to insurers as they can – on top of Obamacare’s huge subsidies to lower income consumers and a penalty tax on people who don’t buy in.  They shortchanged taxpayers by $3.5 billion that, contrary to law, they sent to insurance companies instead.  And their legal posture in a $5 billion lawsuit to contravene a funding restriction expressly enacted by Congress to prevent a bailout via the so-called risk corridor program amount to a promise that they will somehow get them paid in the future.

Democrats will likely support legalizing these payments and authorizing even larger direct corporate bailouts on an ongoing basis as a way to keep insurance companies in the Obamacare exchanges and avoid admitting failure. 

Republicans will likely be attacked as saboteurs for resisting bailout payments, but that misses the point.  Direct corporate welfare to bribe companies to participate in a poorly designed program is throwing good money after bad, masking rather than fixing problems while the cost to taxpayers climbs into the stratosphere.

We won’t be able to get to a real solution until we acknowledge that Obamacare is too rigidly structured and regulated to offer products people actually want, and needs to be reformed or replaced with genuine, functioning markets that give us a much wider variety of plans with different benefit packages, provider networks, and payment structures.

Before that can happen, Obamacare supporters need to be held accountable for the law’s manifest failures – not permitted to paper them over with billions more of our tax dollars.

Phil Kerpen is head of American Commitment and a leading free-market policy analyst and advocate in Washington. Kerpen was the principal policy and legislative strategist at Americans for Prosperity for over five years.  He previously worked at the Free Enterprise Fund, the Club for Growth, and the Cato Institute.  Kerpen is also a nationally syndicated columnist, chairman of the Internet Freedom Coalition, and author of the 2011 book "Democracy Denied."

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