05 May 2014 Shaming Insurers Into Declining Taxpayer Funds Might Not Work–And That’s A Shame
Last week at Humana’s shareholder meeting I asked CEO Bruce Broussard whether he would promise not to take any taxpayer money from ObamaCare’s risk corridors. (Humana declined.) Christopher Flavelle of Bloomberg criticizes our efforts, saying we are “trying a new tactic to gum up the works on Obamacare: publicly shaming insurance companies into refusing federal money that’s designed to keep premiums affordable.”
At one point in the article Flavelle asks, “Why would a company voluntarily decline federal money to which it was entitled by law, which is designed to serve a purpose (keeping premiums reasonable) that most everyone supports?” But earlier in the article he writes:
…successful companies tend not to require government bailouts. Humana, like other big health insurers, is doing great, its share price having significantly outperformed the Standard and Poor’s 500 Index since the Affordable Care Act was signed in March 2010.
Indeed, why should a company that’s doing so well as Humana take taxpayer money? If it is prospering, then it shouldn’t have much trouble covering any losses it takes on the ObamaCare exchanges.
Then there is Flavelle’s claim that the risk corridors “are designed to protect health insurers against financial loss if the people who first sign up for policies through the state exchanges cost more to cover than the insurer anticipated” and “they’re designed to keep insurers in the exchanges and keep premiums down.”
That’s a nice theory. How’s it working out?
Well, health industry officials have warned that hefty premiums hikes, some in the neighborhood of 100 percent, could be coming for 2015. Wellpoint has described its likely premiums increases in the “double-digit plus” range. Insurer Cigna recently said it expected to take losses on the exchanges because “people who signed up during the early months of enrollment for the new Obamacare plans were older than it expected, bought richer coverage and used medical services more.” If history is any guide, that will likely mean premium increase of at least double digits. (Aetna and Humana have also said they plan to take losses on the exchanges, although that was before the late surge in sign-ups.)
Finally, insurers are apparently certain enough that substantial rate hikes are coming for 2015 that they “fear that it will put them at the center of the political blame game over President Barack Obama’s healthcare law.”
It appears that the risk corridors won’t do that much to keep premiums down. The losses on the exchanges may well be big enough that insurers both take taxpayer money and substantially increase premiums. In fact, it’s possible that insurers made this year’s premiums too low knowing that any loss would be bailed out by the risk corridors.
In short, we are getting big premiums increases and a taxpayer bailout. To avoid the latter, shaming insurance companies is one of the few tactics that are left.