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Taxpayers Get Fleeced to Make Obamacare Look Affordable

Written By : Betsy McCaughey
January 29, 2014

Last week, Moody’s rating agency lowered the outlook for health insurers from stable to negative, blaming Obamacare. Few Americans will shed tears for insurance companies. But Moody’s announcement should be a warning sign to taxpayers that they’ll be getting clobbered. Section 1342 of the Affordable Care Act forces taxpayers to make insurers whole for most of the losses incurred selling Obamacare exchange plans through 2016. The bailout is designed to conceal the failure of the president’s signature health law until he is out of office.

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No one in the Obama administration talked up the advantages of bailing out insurers; it was kept under wraps until the fall of 2013. That’s when 5 million to 6 million health plans were canceled because they didn’t comply with Obamacare’s one-size- fits-all coverage requirements effective Jan. 1. As the health law required, insurers developed new plans, setting generally higher premiums and sending out notices canceling the old ones.

This caused public outrage. In an attempt to quell it, the president ignored his own law, telling insurance companies on Nov. 14, 2013, that they could keep selling their old plans. Insurers were caught off guard. They predicted there would be less demand for their new plans and that they’d lose money.

Here’s where the plot thickens. On the same day, an Obama administration health official, Gary Cohen, announced that the federal government — taxpayers — would offset most losses, citing Section 1342. Sweetening what the law already guarantees, he pledged to “modify” the bailout’s “final rules to provide additional assistance.”

That’s when Congress finally did its job and read Section 1342. Sen. Marco Rubio, R-Fla., called it a “dirty little secret” and offered legislation to repeal it. House Republicans held a hearing at which Health and Human Services Secretary Kathleen Sebelius confessed that the administration had never tried to estimate what the guarantee could cost taxpayers. Ah, how freely government bureaucrats spend other people’s money.

Thursday’s downgrade underscores the likelihood taxpayers will be socked with bailout costs of unknown proportions, unless Section 1342 is repealed.

That’s just one reason for repeal. Another is that Section 1342′s purpose is to bamboozle the public and hide Obamacare’s inevitable failure until health “reform” is entrenched beyond the point of turning back.

Inevitable, because anyone with knowledge of health insurance knew from the start that Obamacare’s exchanges could not offer affordable insurance. The premiums have to cover a long list of mandatory benefits, as well as $100 billion in taxes the law imposes on insurers over a decade. Most significantly, the premiums have to cover the cost of caring for seriously ill people at the same price the healthy pay. Every state that has tried this community-rating scheme, including New York, has seen premiums soar, which causes healthy individuals to stop buying insurance. It’s called the “death spiral.” All these factors make “affordable” an impossible goal under Obamacare’s rules. That’s what the bailout provision is designed to conceal through 2016.

As the Society of Actuaries explains, the bailout was designed to incentivize insurers to set premiums low. It’s guaranteed to make Obamacare look affordable. That’s beneficial for politicians tied to Obamacare and helpful to insurers who want market share. Of course, since insurers choosing not to participate in the exchanges can’t get bailouts and don’t get subsidies for their customers, you won’t have the option of buying from them for long.

Think about it. If the federal government gave out subsidies to buy only Ford cars and told Ford Motor Company not to worry about pricing the car, because taxpayers will make up Ford’s losses, how long do you think Chrysler and Toyota could compete?

Moody’s also cautioned that its downgrade was largely because of the “ongoing unstable and evolving environment,” as the Obama administration repeatedly revises the Affordable Care Act, decreeing “new regulations and announcements that impose operational changes well after product and pricing decisions were finalized.”

As any business owner will tell you, a temporary bailout is no substitute for the rule of law. The bailout keeps Obamacare on life support at taxpayers’ expense, while the free market expires and the rule of law disappears. That is the real state of the union.

Betsy McCaughey is a former lieutenant governor of New York and the author of “Beating Obamacare.” She reads the law so you don’t have to. Visit www.betsymccaughey.com

Also see,

Democrats’ Failure Factories

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