The Corner

Politics & Policy

The Unintended Consequences of Ending Insurer ‘Bailouts’

Under Obamacare, insurers are required to provide “cost-sharing reduction” (CSR) — lower deductibles and so on — to lower-income enrollees who buy plans classified as “Silver” in quality. The government is supposed to reimburse the companies for the cost of doing this.

Obamacare itself didn’t provide the money, however. That was supposed to be handled through the annual appropriations process — and Republicans refused to cough up the funds when they gained control of Congress. The Obama administration simply paid the insurers anyway, sparking a lawsuit, and now Trump has threatened to cancel the payments as a way of encouraging Congress to pass a new health-care law.

A new CBO report underlines some of the unintended consequences of doing that.

Basically, Obamacare’s subsidies are pegged to the price of the second-cheapest Silver plan in each market. If these payments are cut off, but insurers are still legally required to provide the cost-sharing reductions, insurers will simply raise Silver premiums to compensate — 20 percent next year and 25 percent by 2025 — and government subsidies will rise in turn.

This will be especially beneficial to enrollees slightly higher on the economic ladder, who receive subsidies but aren’t eligible for cost-sharing reduction — and therefore don’t have to buy Silver plans. Their subsidies will rise along with Silver premiums, but they’ll choose to buy Bronze or Gold plans instead, whose premiums won’t be much affected. Some people will even find that a Gold plan is cheaper than a Silver plan because Gold enrollees don’t have to, in effect, help pay for other people’s CSR.

Indeed, thanks to more generous subsidies even for people whose premiums will be unaffected, total health-insurance enrollment will actually rise slightly by 2026. Overall, the federal deficit would increase almost $200 billion over ten years.

All this ties in nicely to a point that Robert Laszewski made here on NRO earlier this month. The subsidized portion of the individual market is self-stabilizing to some degree, in a perverse sort of way, because when insurers get in trouble they can just raise premiums and thereby soak up more government money.

 

Most Popular

PC Culture

‘White Women’ Becomes a Disparaging Term

Using “white men” as a putdown is no longer extreme enough for the Left. Now it is moving on to doing the same for “white women.” How rapidly this transpired. It was less than two years ago that the approximately 98.7 percent of white women working in media who were openly rooting for Hillary Clinton ... Read More
Politics & Policy

The World Keeps Not Ending

We were not supposed to have made it this far. George Orwell saw night descending on us in 1984. Orwell was, on paper, a radical, but in his heart he was an old-fashioned English liberal. He dreamed of socialism but feared socialists. He feared them because he knew them. I was in the sixth grade in 1984, but I ... Read More
Politics & Policy

The Beatification of Beto

The media’s treatment of Texas Democratic candidate Beto O’Rourke wasn’t the most egregiously unfair coverage of the past year -- that would be the treatment of Brett Kavanaugh -- but it ranks among 2018’s most annoying. The endless glowing profiles of O’Rourke in every publication from Vanity Fair to ... Read More
Culture

A Free People Must Be Virtuous

Dear Reader (Even those of you who didn’t seem to notice or care that I failed to file this “news”letter on Friday), So I’m sitting here at Gate C6 at O’Hare waiting for my flight home. I am weary, pressed for time, in desperate need of a shower, and filled with a great sense of dread for the work ... Read More