360° Coverage : Democrats Falsely Blame Republicans For Their Failed Insurer...

2 Updates
Democrats Falsely Blame Republicans For Their Failed Insurer Bailout

Democrats Falsely Blame Republicans For Their Failed Insurer Bailout

Feb 6 2014, 3:45pm CST | by

Democratic Reps. Henry Waxman, Sander Levin and George Miller, writing in a Politico opinion piece about health insurance “risk corridors,” prove once again that the crafters of Obamacare never...

Filed under: news

 
 
 

32 weeks ago

Democrats Falsely Blame Republicans For Their Failed Insurer Bailout

Feb 6 2014, 3:45pm CST | by

Democratic Reps. Henry Waxman, Sander Levin and George Miller, writing in a Politico opinion piece about health insurance “risk corridors,” prove once again that the crafters of Obamacare never understood health insurance.  The piece claims the Obamacare risk corridors are a Republican idea that Democrats made better.  It’s actually a Democratic idea, and they have made it much worse.

The authors are referring to a provision included in the 2003 Medicare Part D prescription drug legislation—which they opposed.

While it is true that the legislation contained a risk corridor—often called a “risk adjuster”—it was not a new idea, as they claim.  For example, a risk adjuster was included in New Jersey’s Democratic-led health insurance reform in the early 1990s, and it was equally a disaster.  Here’s why.

If health actuaries are allowed to charge a premium based on the risk the person brings to the pool—which is the foundation of all insurance—then there is no need for a risk adjuster.

But Democrats—along with a few Republicans—have long wanted to end that underwriting process.  For decades their goal has been to force health insurers to accept anyone who applies for coverage (known as “guaranteed issue”) and prohibit insurers from charging more for a preexisting medical condition (“community rating”).

That mandate creates two perverse incentives: (1) People wait until they get sick to obtain insurance, hence the mandate forcing people to buy coverage, and (2) health insurers’ efforts to avoid those with expensive medical conditions because they will predictably cost far more than they pay in premiums.

A risk adjuster is a money-redistribution scheme, which may be why Democrats are all for it, intended to offset the problems created by eliminating actuarial underwriting.

If an insurer spends less on claims than a predetermined amount, the government takes some of the excess money and hands it to an insurer that spends more on claims than the set amount.  Of course, one possible reason an insurer spent less on claims is that it better managed its sickest patients, or it is more efficient.  And the insurer spending more may have done a poor job of managing its sickest patients.  No matter, the efficient insurer gets to cross-subsidize the inefficient one.  What could go wrong?

New Jersey decided to impose guaranteed issue and community rating in its individual market in the early 1990s, so the state created a risk adjuster.  But premiums exploded anyway and the risk adjuster never solved the adverse selection problem of getting too may sick and not enough healthy people.

It is true that Republicans included a risk adjuster in the Medicare prescription drug legislation—which got bipartisan support.  But citing that as an example once again demonstrates the authors’ ignorance of health insurance.

Medicare is a “high frequency-low severity” group, especially with respect to prescription drugs.  It’s a seniors’ program, so lots of them will use some prescription drugs, but the variation won’t be that high.  So an insurer participating in the Part D drug program may get some higher-cost patients, but the difference won’t be that much different than the norm because so many use some drugs.

The under-65 population, by contrast, is a “low frequency-high severity” group.  Most people will use little or no medical care in a year.  That means there is a huge variation between the average person and the sickest person.  Getting a disproportionate number of sick people under Obamacare could be the financial ruin of an insurer.

And now that we know that the young are not signing up for coverage in the numbers Democrats had predicted, all of the risk adjustment predictions will likely be off—way off..

In addition, Medicare is a guaranteed issue program; any senior who qualifies gets in regardless of any medical condition.  So when Republicans passed the prescription drug benefit, it had to be guaranteed issue.  They had little choice but to create a risk adjuster to try and offset potential insurer losses.

Democrats did not have to make all health insurance guaranteed issue; they did and figured they could depend on their decades-old fondness for redistributing money to fix the problems.

Finally, the Democrats are being completely disingenuous in their claim that all they did was adapt a Republican idea, because they have a provision for funneling additional money to insurers if the risk adjuster is insufficient—which it will be./>/>

The Department of Health and Human Services made it clear in a November 14 letter to state insurance commissioners that there could be more taxpayer money available.  “Though this transitional policy [i.e. Obama’s postponing the enrollment rules] was not anticipated by health insurance issuers when setting rates for 2014, the risk corridor program should help ameliorate unanticipated changes in premium revenue.  We intend to explore ways to modify the risk corridor program final rules to provide additional assistance.”

Key the “explore ways … to provide additional assistance.”  That’s the insurer bailout.

So, no, Messrs. Waxman, Levin and Miller, you cannot blame your risk corridor program on President Bush and Republicans.  This boondoggle is all yours and we want to make sure you and the Democrats who created and passed this law get ALL the credit you deserve.

Merrill Matthews is a resident scholar with the Institute for Policy Innovation in Dallas, Texas. http://twitter.com/MerrillMatthews

Source: Forbes Business

 
Update
2

3 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (NewCo) and slashing the workforce of 20,000 by 30 ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

3 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double tragedies of MH37 ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Pakistani president appeals for foreign investments
Islamabad, Sep 22 (IANS) President Mamnoon Hussain Monday called on foreign investors and industrialists to invest in Pakistan and take full advantage of a business friendly environment, as the government is implementing a liberal policy to promote trade and economic activities.
 
 
Russia wants economically stable Ukraine: Putin
Moscow, Sep 22 (IANS) Russian President Vladimir Putin said Monday that Russia's banks should continue operating in Ukraine and help the country remain economically reliable and stable, despite troubled relations between the two countries.
 
 
WHO committee identifies more action to contain Ebola
Geneva, Sep 22 (IANS) The World Health Organisation (WHO) Monday said the second meeting of the emergency committee on the 2014 Ebola virus disease outbreak in West Africa identified a number of areas where more action and attention is urgently needed to contain the growing outbreak.
 
 
Ebola outbreak in DRC under control
Kinshasa, Sep 22 (IANS) The Ebola virus disease outbreak in Equateur province in northern Democratic Republic of Congo (DRC), is being brought under control, an official statement citing Health Minister Felix Kabange said.
 
 
 

Latest from the Network

iPhone 6 Plus Declared to Include the Best Ever Smartphone LCD
The iPhone 6 Plus continues to shine in the recent analysis, as a new report claims that the new device includes such LCD which is found to be the best one ever examined in the smartphone category.The report has been...
Read more on Apple Balla
 
Jessica Chastain slams nude photo leak hackers
Jessica Chastain has slammed hackers for the latest spate of nude celebrity photographs leaked online, insisting it is a ''violation''. The 37-year-old actress hit out at the Hollywood hackers behind the latest release...
Read more on Celebrity Balla
 
Pakistani president appeals for foreign investments
Islamabad, Sep 22 (IANS) President Mamnoon Hussain Monday called on foreign investors and industrialists to invest in Pakistan and take full advantage of a business friendly environment, as the government is...
Read more on Politics Balla
 
Russia wants economically stable Ukraine: Putin
Moscow, Sep 22 (IANS) Russian President Vladimir Putin said Monday that Russia's banks should continue operating in Ukraine and help the country remain economically reliable and stable, despite troubled relations...
Read more on Politics Balla
 
UAE police investigating Indian girl's death at sea
Dubai, Sep 22 (IANS) Police in the United Arab Emirates (UAE) are investigating the death of a five-year-old Indian girl, who was drowned while swimming with her mother in the turbulent sea Sep 18, a media report said...
Read more on Politics Balla
 
WHO committee identifies more action to contain Ebola
Geneva, Sep 22 (IANS) The World Health Organisation (WHO) Monday said the second meeting of the emergency committee on the 2014 Ebola virus disease outbreak in West Africa identified a number of areas where more action...
Read more on Business Balla
 
Iraq does not want foreign ground troops to fight IS
Baghdad, Sep 22 (IANS) Iraqi Prime Minister Haider al-Abadi said Monday that Iraq rejects the presence of foreign ground troops in the country to fight the Islamic State (IS) militant group. "Abadi renewed rejection...
Read more on Politics Balla
 
Ghosal eyeing squash gold, bronze for Dipika (Third Lead)
Incheon, Sep 22 (IANS) Indian top seed Saurav Ghosal stayed in the hunt for a squash gold as he stormed into the final of the men's singles while compatriot Dipika Pallikal settled for the bronze at the 17th Asian...
Read more on Sport Balla
 
Panic at Kenya shopping mall after tyre burst
Nairobi, Sep 22 (IANS) Armed Kenyan guards Monday opened fire at the entrance to a major shopping mall here following an accident at the parking lot caused by a sick customer. A man suffering from an epileptic fit...
Read more on Politics Balla
 
13 insurgents killed in Nigeria attack
Abuja, Sep 22 (IANS) At least 13 insurgents were killed in an exchange of fire with Nigerian forces after a local market was attacked in the northeastern state of Borno, a top military source told Xinhua Monday. The...
Read more on Politics Balla