It’s just that the plan may not have been what most people thought it was. And I’m not even talking about eventual single payer; I’m talking about Obamacare itself.
Jonathan Cohn analyzes the first set of data we’ve received on who has actually signed up for Obamacare on the exchanges. There are way fewer young people (only 24% are between the ages of 18 and 34) than the original stated goal. But, as Cohn correctly points out, it doesn’t matter for the first year or two because the government has guaranteed to insurance companies that they’ll be protected against loss.
So the fact that enrollees are older than expected—and therefore much more likely to make claims and reduce insurance companies’ profit margins—is okay because government will take up the slack. And by “government” we mean, of course, the taxpayer. And by “taxpayer” we mean, of course, predominantly the wealthy, although the middle class will pay as well in many circumstances.
Here’s a list of the taxes that are supposed to fund Obamacare. Will they be adequate to cover the fact that (as Cohn points out), nearly 80% of enrollees so far on the exchanges are getting subsidies? It depends on whether this was approximately the number anticipated, and also on whether the tax revenues actually collected will be as great as had been projected.
The Byzantine nature of Obamacare is reflected in the fact that one of the largest items in the list of Obamacare funding tax sources is the following:
$60.1 Billion [projected amount of revenue]: Tax on Health Insurers: Annual tax on the industry imposed relative to health insurance premiums collected that year. Phases in gradually until 2018. Fully-imposed on firms with $50 million in profits.
So Obamacare giveth to the insurance companies and then it taketh away. And then it giveth back again, in a sort of shell game. A significant amount of the revenue that insurance companies get from Obamacare is from the government subsidizing those who might not otherwise buy insurance, and a significant amount of the money the government gets in order to go about subsidizing those people is from taxes paid by insurance companies, which are then given back to the insurance companies in the form of customer subsidies for low-income policyholders, and then…well, you get the idea.
There are a number of ways that Obamacare could go under despite the government’s stalwart attempt to protect insurance companies from loss and therefore gain their cooperation/collaboration. One is if people decide not to comply with the individual mandate if they become aware that there is no real way to enforce it unless a person is eligible for a tax refund from which it can be deducted. That could change, of course, if the government sees that too many people are defying the mandate. But the legislature would have to pass a law to that effect, and to do that the legislature would have to turn more Democratic, which doesn’t seem likely in 2014. Of course, Obama can probably overcome this problem in his favorite way: by executive order or through government agency, bypassing the legislature altogether and putting more teeth into the collection process.
Another potential problem for Obamacare is the fact that the House is considering a bill to abolish the risk corridor and reinsurance protection for insurance companies: i.e. the bailout. Such a bill could pass in the House, but it’s hard to believe it would have a chance in the Senate, at least not this Senate. But in 2015 there’s a possibility, if things keep going the way they’ve been going. This could potentially destroy Obamacare if insurance companies suffer losses as a result; that’s why insurers are lobbying so mightily against such a bill.
In case you haven’t followed some of these more arcane aspects of Obamacare, here’s how the risk corridor and reinsurance programs are supposed to work:
The bailout provisions of Obamacare are found in Sections 1341 and 1342 of the Affordable Care Act…The first provision bails out insurance companies for costs associated with individual patients when they exceed $45,000. Under this so-called reinsurance program, insurers will be able to push off 80 percent of costs between $45,000 and $250,000 onto a fund financed by a fee of $63 per head on customers of insurance companies and workers covered by self-insuring companies. Given that most of the associated costs will almost certainly be passed on to consumers by insurers, that fee is in effect a tax. And in the event that the fund does not generate revenue sufficient to cover its costs — far from an unlikely scenario — then taxpayers will be explicitly on the hook. This preemptive bailout was included in the law as a deal-sweetener to induce more insurance companies to participate in the program. It is a good deal for insurers, for whom any opportunity to reassign risk to somebody else is a welcome profit opportunity, but it is a terrible deal for consumers and taxpayers.
The second and potentially even more troubling bailout provision is the one for so-called risk corridors, which asks the insurance company to project their total costs and then picks up most of the difference if losses should exceed those targets. The potential for gaming the system here is obvious and dire, and the potential costs are enormous. Senator Marco Rubio already has introduced a bill to repeal this provision, though it is unlikely to pass. At the very least, Republicans should ensure that the provision, scheduled for sunsetting in 2016, dies on schedule.
The potential costs and risks associated with these provisions are worrisome, and the fact that they are in effect hidden from the public is troubling in and of itself. The complexity of Obamacare is by design: By obscuring the realities of the program, Obamacare’s architects ensured that it would be easier to peddle such untruths as “If you like your insurance, you can keep it” and promises of substantially lower premiums. The reality of Obamacare has shocked Americans, but it has not shocked them enough: Even as the law sends many Americans’ insurance premiums skyrocketing, those higher premiums do not cover the costs associated with the program — Americans will be paying on the front end and on the back end as well, with premiums on one side of the equation and bailouts on the other.
If Congress had tried to pass a law simply transferring $1 trillion to insurance companies over the next decade, there would have been energetic resistance to its doing so. The Affordable Care Act amounts to the same transfer, even as it places insurers in the enviable position of having a federal law in place that gives Americans a choice between buying their products and being fined by the federal government.
Unlike the Wall Street bailouts, the insurance bailouts are not a one-time expedient instituted in the face of a crisis: They represent an open-ended claim on taxpayers’ resources and a transfer of risk from private, profit-seeking enterprises onto the government. Together, the provisions represent an important part of the Democrats’ agenda for transforming what we know as insurance companies into semi-public utilities managed by central planners in Washington.
Most Americans do not understand this, and it’s not necessarily because they’re stupid. It’s because the facts have been purposely suppressed. It’s also because the law is complex and requires study, and many people’s eyes glaze over when discussing the finer points of health insurance and funding. And then of course there are a number of people who couldn’t care less, as long as the subsidies go to them.