Politics & Policy

Against the Obamacare Bailout

(Dreamstime image: Pogonici)

Barack Obama, who savaged the Bush administration over the 2008 bailouts, is planning on going out with . . . a massive bailout. Congress can and should put a stop to this nonsense.

When the so-called Affordable Care Act was being debated, conservative critics predicted that it would ruin private insurance companies. But the insurance companies largely supported the bill, at least after they were bought off with a provision, the “risk corridors,” that would spread profits and losses across the industry, in effect converting competing insurance companies into a national cartel.

The Affordable Care act is, as predicted, ruining private insurers.

In this case, we don’t hate to say we told you so. We did, and you should have listened.

But the insurance cartel has a problem: The risk corridors were supposed to protect insurers against large losses by imposing what amounts to a tax on unusually large profits, dividing up these so-called windfalls among insurance companies. This is a textbook progressive scheme, in that it is based on distrust of markets and competition (which progressives, who are intellectually stuck in the 19th century, believe to be wasteful and irrational), which it proposes to replace with government-managed corporate collusion — why bother nationalizing health care when you can manage the finances of nominally private firms as though they were government agencies?

You can probably guess what went wrong with this ingenious plan: There weren’t nearly enough “windfalls” to cover the losses that Obamacare has imposed on insurers. In 2014, the risk-corridors scheme was able to cover only about 12 percent of the related losses.

Congressional Republicans saw this coming from many miles away. While they did not have the power to stop Obamacare in its tracks — the law passed in spite of unanimous Republican opposition — they did have the wit to put in a few intelligent provisions, one of which, pressed by Senator Marco Rubio, requires that the risk-corridors fund be revenue-neutral, i.e., that it pay out in benefits no more than it collects in levies, thus preventing the program from being used as a general bailout fund for insurance companies.

The insurance companies, of course, are none too happy about this state of affairs. Reminding Americans that there is a reason we loathe insurance companies, they sued the federal government, arguing that they were owed a bailout in excess of the risk-corridor funds irrespective of the fact that the law explicitly forbids this.

The Obama administration, to no one’s surprise, agreed.

Obamacare is not a failing health-insurance program; it is a failed health-insurance program, so ridden with exceptions, exemptions, political favoritism, cronyism, mismanagement, and wishful thinking that even Hillary Rodham Clinton doesn’t really support it, arguing, as she does, for repealing one of the major taxes included in the Affordable Care Act to allow Democrats and their media cheerleaders to pretend that the program will not lead to larger deficits. Obamacare isn’t a program at all, anymore, only an exercise in ad-hocracy, the point of which is to allow Barack Obama to ride his unicorn off into the sunset talking about how he reformed American health care even as it collapses into a shambles.

Obamacare isn’t a program at all, anymore, only an exercise in ad-hocracy.

Because President Obama is prohibited by law from making risk-corridor payments out of general funds, he is simply knuckling under to the insurance industry’s lawsuit without a fight and planning to fund this bailout out of funds set aside for legal settlements. This is dishonest, like practically everything about Obamacare, and it is probably illegal, like more than a few things about Obamacare, the ill-considered opinion of John Roberts notwithstanding.

Republicans have sent the secretary of Health and Human Services a letter insisting that using judgment funds for a backdoor risk-corridor bailout is flatly illegal. They are correct, and should be prepared to take their case to court — again — if the Obama administration should make it necessary.

Perhaps someone could remind Donald Trump that running against corporate bailouts is, historically, not a bad position for presidential candidates.

Until then, it is up to Congress to continue the fight.

Higher premiums and fewer choices for you, massive — and, left unchecked, endless — bailouts for politically connected insurance companies. That’s Obamacare.

We don’t hate to say we told you so.

The Editors — The Editors comprise the senior editorial staff of the National Review magazine and website.

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