Republicans, don’t forfeit the battle against Obamacare’s insurer bailouts

Washington Examiner

Last week, Sens. Lamar Alexander, R-Tenn., and Patty Murray, D-Wash., introduced a bill they say will stabilize Obamacare’s insurance exchanges. A dozen Republicans and a dozen Democrats have already signed on as co-sponsors.

That’s a shame. The proposal is a bad deal for proponents of free markets. It effectively bribes insurers to stay in the exchanges with between $25 billion and $30 billion in taxpayer dollars between now and the end of 2019.

The bribes in question are “cost-sharing reduction” subsidies, or CSRs. Obamacare requires insurers to cover out-of-pocket expenses for low-income enrollees earning between 100 and 250 percent of the federal poverty level, or between $24,600 and $61,500 for a family of four. The CSRs were designed to “reimburse” insurers for these expenses. The tab this year was $7 billion and about 6 million people were eligible.

But Congress never actually appropriated funds for the CSRs. That didn’t stop the executive branch, first under former President Barack Obama and then under President Trump, from making the payments, in direct violation of the Constitution and a 2016 federal court ruling.

This month, Trump finally decided to stop paying these insurance industry bailouts.

Proponents of the CSRs say that the payments are needed to keep insurers from absorbing catastrophic losses, as well as either raising premiums more than they already have or leaving the exchanges.

But Obamacare’s regulations are to blame for skyrocketing premiums and insurers’ losses. Guaranteed issue and community rating, which require insurers to sell to all comers and limit their ability to charge the sick more than the healthy, have resulted in an exchange pool that’s disproportionately old and sick — and therefore costly.

That’s largely why premiums for exchange plans are up an average of 25 percent this year and double what they were in 2013, pre-Obamacare. It’s no wonder only 12 million people signed up for exchange coverage this year. That’s half of what the Congressional Budget Office originally predicted.

The problem is only getting worse. On Nov. 1, when 2018 coverage goes on sale in the exchanges, premiums in Florida will be nearly 45 percent higher than they were this year — and almost 60 percent higher in Virginia.

Throwing billions more taxpayer dollars into this broken system, without repealing Obamacare’s premium-inflating mandates, is unwise.

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Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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