National Review decries Obamacare’s “bailouts” for insurance companies:
The bailout provisions of Obamacare are found in Sections 1341 and 1342 of the Affordable Care Act, both of which should be repealed. Doing so will be difficult, but it is not impossible. 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.
Cohn pushes back:
Bailouts typically start with companies taking egregiously irresponsible actions and end with the government forking over mind-boggling sums of money to save them. Think of the savings and loans institutions misleading the public about the state of their finances in the 1980s—or the financial industry making those bad home loans and risky investments a decade ago. Each of those involved grievous management errors, frequently skirting the limits of legality. The federal outlays to save those banks were in the hundreds of billions of dollars.
With Obamacare, the situation is different. Projecting future insurance costs inevitably involves a little guesswork. With a brand new program like Obamacare, it inevitably involves a lot of guesswork. Even the smartest, most responsible actuaries might not get the numbers right … Truth is, no insurer will be sure about its beneficiaries for many months, until the open enrollment period ends and the newly insured have a few months in which to file claims. That makes it impossible to know what kinds of losses, if any, insurers will take. But even if the losses are significant, the taxpayers won’t be in for another Wall Street-style bailout.
The Dish 