Did Rubio deal a mortal blow to ObamaCare?
posted at 1:01 pm on November 25, 2015 by Ed Morrissey
If so, it was a remarkably mundane demand that punctured the ObamaCare balloon. Two years ago, Marco Rubio won a fight during the budget battles to include a requirement for HHS to maintain budget neutrality in its risk-corridor programs. Rubio had pushed back against this program for months, claiming — as it happens, accurately — that it was a back-door bailout of the insurance companies that had cooperated in the effort to pass ObamaCare. Instead of allowing HHS to dip into general funds for risk-corridor payments, Rubio’s rider restricted those payouts to funds collected from taxes on insurers.
The move forced HHS to cut expected risk corridor payments to pennies on the dollar, and prompted the closure of more than half of the co-ops launched by HHS to provide supposedly low-cost coverage. Now that United Healthcare has signaled that it may cut its losses and get out of the ObamaCare market, The Hill credits Rubio with starting the death spiral many predicted when Democrats first passed ObamaCare in March 2010:
The risk corridors program was designed to be a temporary stopgap against high insurance claims during the first three years of the new federal program.
If an insurer had more expenses than it planned, the federal government would cover the remaining balance using cash collected from companies that paid out fewer claims than expected.
The program was almost certain to need extra money in the first few years, when there were fewer healthier customers signing up. But Rubio’s provision in 2014 severely limited any new spending by requiring the program to become budget neutral.
The damaging effects of the budget-neutral requirement became clear in October.
The Obama administration disclosed it could only afford to pay 13 cents of every dollar owed to the insurance companies — after insurers had already locked in their rates for the upcoming year. …
Within weeks, about a dozen start-up insurers known as CO-OPs announced they’d be shutting their doors, in most cases because they lacked the cash flow to stay solvent. And at least two other insurers — WinHealth Partners in Wyoming and Moda Health in Washington — pulled out of the exchanges.
At the time, no one was under any illusions about Rubio’s intent, either. Allahpundit pointed out almost immediately that it would accelerate the death spiral, thanks to a lack of ability for government to prevent it. Business Week noted that Rubio’s bill went beyond merely limiting the risk corridor payouts to handcuffing HHS to keep it from rescuing insurers. By May 2014, the threat was sufficient that the White House pledged to find more funding for risk corridor payouts. Peter Suderman sounded skeptical about the prospects for additional funding, and Suderman turned out to be right, as events have shown in the past several weeks.
Does Rubio deserve credit for killing ObamaCare? Well, like the peasant in Monty Python and the Holy Grail, ObamaCare ain’t dead yet. It’s possible that starting a death spiral can have unintended consequences. Not long after Rubio’s rider became law, Blue Cross Blue Shield warned (for reasons of self-interest, mainly) that the death spiral would force the government into a single-payer system. Much depends on what comes afterward, and who gets to make those decisions. A Republican Congress won’t pass a single-payer system, but a Democratic president won’t sign a repeal of ObamaCare. If the collapse begins in October 2016 with United and possibly other insurers parachuting out of the individual marketplaces, then a Republican president would be in good position to sign a repeal — and would have a lot more likelihood of getting elected to boot. Otherwise, what might happen is that the system crashes, and nothing follows for several years while the taxes and the mandates still apply.
But Rubio should get credit, at the very least, for pushing a common-sense and utterly necessary firewall to protect taxpayers from a massive and perpetual health-insurance bailout. The risk corridor program was supposed to last three years while insurers found the sweet spot on premium pricing; it lasted two. The massive payments that would have gone out in the third year without the budget neutrality requirement show that this program would never have come to an end. The fantasy of co-ops providing cheaper insurance was exposed as just a government-subsidized bait-and-switch scheme. Rubio’s intervention made it clear that ObamaCare isn’t a system just going through some learning-curve bumps in the road, but a fundamentally flawed and dishonest scheme that would have hoodwinked taxpayers on costs for decades.
If that leads to ObamaCare’s repeal and replacement with a rational, market-based reform, then Rubio will deserve credit for the win. But let’s win first before handing out the trophies.
Update: Case in point: The White House wants to restore access to deficit spending to fund the risk corridor payouts, to no one’s great surprise. But Timothy Carney discovers that the Obama administration’s preening on lobbyists takes a back seat to getting United Healthcare back within the fold:
CMS said it “will explore other sources of funding for risk corridors payments….” CMS also declared the unfunded portion of Obamacare’s initial promised insurer bailout was nevertheless an “obligation of the United States Government for which full payment is required,” even though at least under the current appropriation law it is illegal.
This is where the intimate network of the Obamacare insiders comes in. CMS — which issued the pledge to fully bail out United Healthcare and its cohorts — is run by acting administrator Andy Slavitt. Slavitt is a former executive at United Healthcare (while he held that position he contributed to Obama’s 2008 election).
Slavitt’s appointment and management of bailout money for UHC clearly clashes with Obama’s much ballyhooed ethics rules, which require appointees to swear: “I will not for a period of 2 years from the date of my appointment participate in any particular matter involving specific parties that is directly and substantially related to my former employer…” In acknowledgement of this conflict of interest, Obama issued an ethics waiver for Slavitt.
Meanwhile, the insurance lobbyist leading the industry’s push for more Obamacare bailout money is Marilyn Tavenner, Obama’sprevious chief of CMS, now head of America’s Health Insurance Plans. AHIP says risk corridors aren’t the group’s top focus, but Tavenner is speaking out on it.
In summary: Tavenner helped build the risk corridor program, and then went to the industry that would get the money. Slavitt left the insurer with the biggest losses, and now is the government official promising to bail out his former employer.
In a shorter summary, the Obama administration is opposed to insider regulation and crony capitalism … unless it refers to their insiders and cronies.