Blue Cross Blue Shield: If Republicans kill a bailout for insurers under ObamaCare

hot air ^ | january 10, 2014 

You remember the “risk corridor” provisions, right? If a new ObamaCare plan comes in under budget, the insurer pays the difference between the actual cost and projected cost to HHS. If it comes in over budget, HHS pays the difference to the insurance. It’s a way for insurers to spread risk among the industry with HHS as middleman. (The bit in the excerpt about the White House modifying the rules for its new “transitional policy” is a reference to this.) Problem is, there’s no cap on how much HHS might need to pay out if lots and lots of plans come in over budget — a plausible scenario given the whispers from Humana about what it’s seeing among the demographic mix of ObamaCare enrollees so far. If too many plans have lopsided numbers of sick enrollees who need expensive treatments and few healthy ones to supply the revenue needed to offset that expense, HHS could be on the hook for the shortfall via a de facto bailout — unless Congress repeals the risk corridor provisions, in which case the insurers will be stuck with the bill. How many of them will be able to cover it and how many will go belly up? Of the ones who stay in business, how many will have to charge exorbitant premiums next year to make up for their losses? And if premiums soar, some portion of their consumers are bound to cancel their plans, which means even less revenue for the insurers and the need for even higher premiums, etc. That’s the “death spiral,” and in theory that’s where single-payer comes in. If the insurance industry melts down because Congress cut its financial lifeline, what replaces it?