Tags: Insurers | Obamacare | Losses | Economy

Insurers' Obamacare Losses May Cost US $5.5 Billion in 2015

Tuesday, 04 March 2014 01:19 PM

Health insurers such as WellPoint Inc. and Humana Inc. stand to gain $5.5 billion from the government next year to cover losses from Obamacare in a program the law’s opponents label a bailout.

The money, outlined in President Barack Obama’s proposed budget for the fiscal year that begins in October, is designated to help insurers who find the cost of the law higher than expected, based on the percentage of older, sicker people who sign up compared with younger enrollees.

Under the Patient Protection and Affordable Care Act, insurers who record a profit of 3 percent or more on their Obamacare business would put some of their gains into a government-controlled fund. Companies whose claims cost at least 3 percent more than their premium revenue can access the pool. While it isn’t clear in Obama’s budget how much he expects to collect from insurers who profit on business, the $5.5 billion may signal that more insurers will be withdrawing money from the fund than are adding to it.

“If you want to insure the uninsured, and you want to set up a competitive marketplace and drive health system improvement, you’re not going to do that without off-loading some of the risk for insurance providers,” Dan Mendelson, the president of Avalere Health, a Washington consulting firm, said in a telephone interview.

The president’s budget plan also calls for $117 billion more in pharmaceutical industry rebates for medicines used by Medicare and Medicaid and would spend about $14.6 billion over a decade to train new health providers, including doctors, to help reduce future shortages.

4 Million Enrollees

About 4 million people have so far signed up for private health plans from companies under the act known as Obamacare. Insurers participating in the law’s new health exchanges are required to cover everyone who applies for a plan, regardless of their health.

The risk corridors program was adopted from earlier federal health programs that rely on private insurers, including Medicare’s prescription drug benefit.

At least one insurer, Louisville, Kentucky-based Humana, has said it expects to seek money from the pool. The company said in a Jan. 9 regulatory filing that it expected new Obamacare customers to be sicker and costlier than anticipated, after the U.S. government’s decision to let healthier people keep their existing plans.

Republican opponents of the Affordable Care Act have criticized the risk corridors as a bailout for insurers, and some discussed trying to repeal the risk mechanism earlier this year.

Repeal Dropped

Those plans, though, were dropped after the Congressional Budget Office said on Feb. 4 that the health law’s programs to reduce risk for insurers, would save the government $8 billion over the next 10 years. A spokeswoman for the White House’s Office of Management and Budget, Emily Cain, didn’t immediately answer e-mailed questions about the issue.

Obama’s budget also proposes to save about $402 billion over the next decade mainly by reducing spending in Medicare, the $513 billion program for the elderly and disabled, and Medicaid, the state-run program for low-income people that will cost the federal government $308 billion this year.

The budget targets drugmakers for much of the cuts, including paying $117 billion more in rebates for medicines used by federal health program beneficiaries. Obama’s 2014 budget contained a similar proposal that Congress didn’t adopt.

Obama’s proposal to train new health providers seeks to reduce the U.S. shortage of primary care physicians that is estimated at 8,000 doctors by the U.S. Health Resources and Services Administration.

© Copyright 2019 Bloomberg News. All rights reserved.

1Like our page
Health insurers such as WellPoint Inc. and Humana Inc. stand to gain $5.5 billion from the government next year to cover losses from Obamacare in a program the law's opponents label a bailout.
Tuesday, 04 March 2014 01:19 PM
Newsmax Media, Inc.

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved