WaPo: ObamaCare risk corridor taxes pull a “reverse Robin Hood”
posted at 4:41 pm on January 14, 2016 by Ed Morrissey
Remember “risk corridors”? Democrats and Barack Obama set them up in the Affordable Care Act to indemnify insurers against higher-than-predicted utilization rates in the first few years of ObamaCare, to keep them afloat while premiums stabilized. Marco Rubio pushed to pass a rider in the “cromnibus” to prevent appropriated funds from being used to supplement risk-corridor payments, forcing HHS to use only taxes collected from insurers for payments. The restriction on funds ended up pushing most ObamaCare-created co-ops out of business, as they could not survive without significant federal subsidies.
That outcome may get a closer look now that the restrictions on payouts shows an odd tilt in subsidies. As the Washington Post’s Amy Goldstein reports, the program now looks more like a wealth transfer, but one that shifts funds from smaller insurers to larger insurers. Viva Health in Alabama just got socked with a $1.7 million tax bill, or about 40% of all the premiums they have collected on the ObamaCare exchange. Guess who got the risk-corridor subsidy payments based on those taxes?
The goal is to help keep insurance markets stable by sharing the “risk” of sicker people and removing any incentive for plans to avoid individuals who need more medical care. Such stability is likely to encourage competition and keep overall prices lower for consumers, while its absence can undermine both and limit coverage choices — the basic principles of the law.
Yet the way the Obama administration has carried out this strategy shows another unexpected consequence of the 2010 health-care law. The administration defends its approach, but critics say the “risk adjustment” program is having a reverse Robin Hood effect — taking money from some plans that are small, innovative or fast-growing, while handing windfalls to some of the industry’s most entrenched players.
Indeed, Blue Cross and Blue Shield of Alabama, which dominates the market in which Viva sells, is getting more than $2.5 million.
What. A. Shock. Government steals from smaller players in a market through regulation and taxes and gives it to larger players in a market? Why, it’s as if the larger players in the market use government regulation as rent-seeking behavior designed to stifle competition. Whodathunkit?
Is that what happened to the ObamaCare co-ops too? Did they get squeezed out by the need to provide payments to the larger insurers in their markets after HHS could no longer raid its appropriated funds to keep them afloat? It might be interesting for some enterprising analyst to look at each of those markets and find where the risk-corridor payments went.
However, this “reverse Robin Hood” isn’t unique in ObamaCare. The entire structure of the risk pools depended on the individual mandate to force younger and healthier people into purchasing comprehensive insurance plans they wouldn’t come close to fully utilizing. The overpurchase of insurance on a massive basis was supposed to subsidize the cost of sicker and older people entering into the system after eliminating pre-existing condition pricing that reflected actual risk. Given that younger people are usually significantly less wealthy than older people, this entire strategy was predicated on picking the pockets of poorer people through outright fraud in order to allow wealthier people — and more politically powerful people — to save cash.
Speaking of Robin Hood … rest in peace, Alan Rickman. He’s about the only entertaining part of Robin Hood: Prince of Thieves, but he’s much better known for better films: Die Hard, Harry Potter, and the deliciously satirical Star Trek takedown, Galaxy Quest. “… and Cancel Christmas!” Indeed, indeed.