Obamacare Takes On Insurance Companies’ Risk With Our Money


Insurance companies, like the rest of us, transfer risk by purchasing insurance policies. In the case of insurers, it’s called reinsurance and coverage kicks in when the cost of claims reaches a certain amount. The insurance companies pay premiums to the reinsurance companies, and reinsurance helps to keep insurers solvent in the event of large losses or catastrophes. For insurance companies, reinsurance premiums are part of the cost of doing business. At least that’s how it used to be in the case of health insurers. Now the federal government is picking up that cost for Obamacare insurers, which means taxpayers are footing the bill. Not only that, the government is actually paying more than is contractually required, and the funding for this program comes from every American who has private health insurance.

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The Federalist explained in more detail how the whole scheme works, and here it is in a nutshell:

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For those keeping score allow me to recap:

  1. Over 138 million people paid a total of $8.7 billion to a reinsurance fund.
  2. Only 16.3 million people were in the risk pool that this money was set aside to fund claims.
  3. The money in this fund was supposed to reimburse insurance companies 80 percent of the large claims.
  4. Instead the government paid the insurance companies 100 percent of the large claims.
  5. The total paid out was $7.9 billion.
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So the government collected more money from you than they needed, gave more money to insurance companies than the original agreement, and kept $800 million of your money for insurance companies in the future. Yet for 91 percent of those who paid in, it didn’t help whatsoever. (Read More)

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This helps to explain why insurance companies were on board with this train wreck of a law, and is one more reason why health insurance premiums for everyone not enrolled in Obamacare continue to skyrocket.

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