The PJ Tatler

Too Important to Fail? Big Insurance Will Look to Washington for Obamacare Bailout

It’s early yet and there’s a chance that the skewed Obamacare numbers of young and healthy enrollees being dwarfed by old and sick ones may not be as bad as some analysts are predicting.


But Big Insurance companies who salivated at the chance for tens of millions of new customers driven into their laps by a coercive government didn’t take any chances when the law was being written. By dint of the millions of dollars they’ve contributed to the campaigns of both parties, they were able to sneak into Obamacare a bailout provision that would have taxpayers footing the bill for the administration’s incompetence and their own greed.

Dan Mitchell compares a potential insurance bailout with the TARP program:

Some financial institutions gambled on the government’s misguided policies and got caught with their pants down when the bubble burst.

But rather than let those companies fail and use the sensible and non-corrupt “FDIC resolution” method to recapitalize the banking system, we got a taxpayer-to-Wall-Street bailout.

Or, from the perspective of the big banks, they got a very good return on their campaign contributions (read Kevin Williamson if you want to get upset about this disgusting form of cronyism).

Well, as Yogi Berra might say, it’s deja vu all over again.

Except now the fat cats lining up at the Treasury door are the big health insurance corporate titans. They got in bed with the White House to push Obamacare and now they’re worried about losing money now that it’s becoming more apparent that the American version of government-run healthcare doesn’t work any better than the British version. (H/T: Instapundit)


Mitchell points to this Charles Krauthammer column that explains the insurance bailout mechanism in Obamacare:

…there’s a Plan B. It’s a government bailout. Administration officials can’t say it for political reasons. And they don’t have to say it because it’s already in the Affordable Care Act, buried deep. First, Section 1341, the “reinsurance” fund collected from insurers and self-insuring employers at a nifty $63 a head. (Who do you think the cost is passed on to?) This yields about $20 billion over three years to cover losses. Then there is Section 1342, the “risk corridor” provision that mandates a major taxpayer payout covering up to 80 percent of insurance-company losses.

Mitchell speculates that the reason the bailout provision is in the bill is because “maybe the White House knew that Obamacare would be unstable and they needed a bailout option to keep the system from totally unraveling. Particularly when it seems that the Obama Administration is arbitrarily changing the system every other day.”

So, in addition to making a deal with the devil that will enrich their companies by tens of billions of dollars, the titans of the health insurance industry made damn sure that if things went south, they wouldn’t be stuck holding the bag.


How did Republicans miss this? This would have been a deal killer even with some Democrats if it had come out before the final vote. Regardless, the question is what to do about it.


…the GOP needs to act. Obamacare is a Rube Goldberg machine with hundreds of moving parts. Without viable insurance companies doing the work, it falls apart. No bailout, no Obamacare. Such a bill would be overwhelmingly popular because Americans hate fat-cat bailouts of any kind. Why should their tax dollars be spent not only saving giant insurers but also rescuing this unworkable, unbalanced, unstable, unpopular money-pit of a health-care scheme? …Do you really think vulnerable Democrats up for reelection will vote for a bailout? And who better to slay Obamacare than a Democratic Senate — liberalism repudiating its most important creation of the last 50 years. Want to be even bolder? Attach the anti-bailout bill to the debt ceiling. That and nothing else. Dare the president to stand up and say: “I’m willing to let the country default in order to preserve a massive bailout for insurance companies.” …Who can argue with no bailout? Let the Senate Democrats decide: Support the bailout and lose the Senate. Or oppose the bailout and bury Obamacare.


Some choice. The problem is, if there’s no bailout and the insurance companies suffer enormous losses, what happens to the individual insurance market? Or group plans? Might premiums be massively increased to offset the losses? How else can the companies recoup their losses? How many more Americans will be unable to afford insurance of any kind if the government lets them hang?

No one knows, and the insurance companies are banking on that uncertainty — just like the big banks did for TARP when they warned of a depression if they didn’t get their bailout.

“Too Big to Fail” may become “Too Important to Fail” if the companies get their way.

Join the conversation as a VIP Member