Pittsburgh Insurer Highmark Swings For The Fences On Obamacare Bailout

Commentary by John R. Graham

Source Forbes

Health insurers have not had much to cheer about lately, when it comes to Obamacare. They have been losing money on exchanges, and there is little hope that will change. So, a large health plan in Pittsburgh has asked judges to give it Obamacare money the Administration promised, but Congress declined to appropriate.

As reported by Wes Venteicher and Brian Bowling of the Pittsburgh Tribune-Review, Highmark lost $260 million on Obamacare exchanges in 2014, and claims it is owed $223 million by taxpayers. Unfortunately, it received only about $27 million. And things are getting worse. To date, Highmark has lost $773 million on Obamacare exchanges.

It is not that Highmark has been singled out by anybody. On the contrary, the Administration announced last year it was only going to pay about 13 cents on the dollar for all insurers’ exchange losses, via Obamacare’s “risk corridors.” This was not the Administration’s preferred course of action. The Administration wanted to pay insurers one hundred cents on the dollar, which it had promised them.

President Barack Obama sits down for a roundtable discussion and lunch with people who wrote to him about the Affordable Care Act in Milwaukee in early March 2016. (MANDEL NGAN/AFP/Getty Images)

However, it could only pay out monies it had collected from insurers which had profited more on exchanges than expected. Because both the Administration and most insurers badly miscalculated the risk in Obamacare’s exchanges, there were very few winning insurers, and the revenue a fraction of what was expected.

No problem: Taxpayers would cover the rest – or so the Administration and insurers initially claimed. I was among those analysts who recognized Congress needed to appropriate funds to cover the losses. And Congress was not inclined to do so. As a consequence of having dragged Obamacare over the legislative line in 2010, health insurers lost any sympathy from Republican politicians, who now control both chambers in Congress.

No industry which relies on government revenue, which health insurers increasingly do, can afford to be in that position for long. Government-dependent businesses go to great lengths to flatter politicians of both parties in pursuit of so-called bipartisan solutions. When they win, they win big. One recent example is the Medicare “doc fix” of April 2015, through which a broad coalition of health industry lobbyists managed to get near-unanimous Congressional consent for a budget-busting bill that significantly increases the federal government’s control of the practice of medicine.

Health insurance executives likely look back with some regret at their decision to go all-in on Obamacare in 2010 without any Republican support. Once the GOP took over the Congressional majority, its members attacked a number of suspect Obamacare cashflows that were being paid out to insurers, apparently in violation of the law. It was a remarkable development: Republican politicians who opposed the law were demanding it be executed as written, while the Administration and its insurer allies were demanding it be bent, folded, and mutilated to guarantee revenues to insurers in accord with their business plans.

Insurers had a small win last December, when they got a one year delay in a fee levied on employer-based policies, which funds Obamacare.  It can reasonably be expected that the fee will be kicked down the road again this December, and next December, et cetera, as Obamacare becomes just another unfunded liability.

However, insurers also suffered a major loss when a federal judge decided just a few days ago that the Administration was illegally paying insurers from another pot of Obamacare money, so-called cost-sharing reductions. These are subsidies to insurers which enroll Obamacare beneficiaries whose incomes are so low they cannot afford Obamacare’s high deductibles and co-pays, despite tax credits that reduce their premiums. Insurers receive subsidies to reduce these beneficiaries’ out-of-pocket payments.

However, Congress has not appropriated funds to pay out these subsidies, so the Administration cannot pay them, according to the DC Federal District Court. In the wake of this freshly issued judgment, Highmark’s decision to ask a judge to give it taxpayer dollars not appropriated by a Congress which seeks to repeal Obamacare is a real swing for the fences.

On the other hand, taxpayers can be relieved that only Highmark, one other insurer in Oregon, and the Iowa Insurance Commissioner (on behalf of a failed co-operative health plan) have decided to go for a judicial bailout. The rest of America’s health insurers are in the same boat, not having received as much taxpayer money as the Administration promised. Almost all of them have accepted that fact, and moved on from their failed attempts to wring more money out of Congress to prop up Obamacare.

Investors’ Note: UnitedHealth Group (NYSE:UNH), Aetna (NYSE:AET), Anthem (NYSE:ANTM), are among the insurers affected by Congress’ declining to appropriate moneys to subsidize insurers via the Affordable Care Act.

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