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Potential Taxpayer-Funded Bailout Under Obamacare

January 16, 2014 - 6:00pm

U.S. Sen. Marco Rubio, R-Fla., took to the floor of the U.S. Senate on Thursday to warn about taxpayers being forced to bail out President Barack Obama's federal health-care law:

I ... wanted to take a momentto talk about an emergingproblem with the health care lawthat has only begun to filterout in the news cycle, but Ithink bears watching in the daysand weeks to come.

As we all know, a key part ofthe health care law is theexchanges, which aretheoretically supposed to becompetitive, private marketplaces where individuals can go online, either through their stateexchange or the federal exchange, and buy health insurance at acompetitive price, and you canchoose between these differentplans.Thats the idea behind a health exchange.And in and of itself, the ideaof an exchange is not a bad one if appropriately administered and it doesnt come accompanied withall the other things the healthcare law came accompanied with.

But there is a problem with theway the exchanges are nowdesigned that have not yetreceived the attention theydeserve, but I promise youre going to be hearing a lotabout it in the days to come.The technical term for it isrisk corridors, and what it basically means is thatcompanies who participate in anexchange or a marketplace ininsurance are told that there is a reinsurance plan in place thatwill protect them in case ofloss or catastrophic loss.

So, for example, lets say youare an insurance provider andyou go into a marketplace, andthen it turns out that thedemographics of the groups thatsigned up for your plans didntturn out the right way or therewas an enormous spike in healthcare costs, whatever it may be,and you suffered dramaticlosses, a risk corridor is inplace to protect you from that.The reason why is, No. 1,its a safety net, per se, forthe industry on a short-termbasis. And the reason why thatsimportant is because you wantpatients bills to be paid andyou dont want people to gounable to see their bills paidand providers to be left out.

The problem is that applyingthat to the health care exchangeis going to proveextraordinarily problematic.Because whats happened over thelast few weeks, as we predictedwould happen, is that not enoughyoung people are signing up forthe exchange.In order for health insurance towork, you have to have enoughyounger and healthier people onit.If you have a health insuranceplan thats largely composed ofpeople that are guaranteed toget sick, economically itdoesnt work, and there is nodispute about that.In fact, by the administrationsown statistics, they say that atleast 38 percent of the enrollees inthe exchanges had to be underthe age of 34 in order for theexchanges to work in anactuarially sound way.So based on the assumption thatthats what was going to happen,insurance companies bid on theseexchanges, and offered a product, and have begun to sign peopleup.

The problem is that so far thatfigure is not being met.The numbers are just starting tocome in, we dont know the fullpicture yet, but the trends aretroubling.No. 1 is, not enough peopleare signing up.The target goal is a total ofabout 7 million people ormore by a deadline that has nowbeen extended to March 31. Thenumber is less than 2.2 million.

Now theres still eight weeksleft or so, so well see whathappens, but the trends are notpositive.Heres an even more troublingtrend: Only 30 percent of national enrolleesare from that demographic that Idescribed to you.Only 30 percent are under the age of34.In Florida, its only 25 percent.Heres the fundamental problemthat we have right now with theexchanges, beyond all the other ones thatwe have already discussed adnauseam: Not enough people are signing upand not enough people under theage of 34 are signing up.

The result is that the way thisis trending now, the exchangesare becoming more like ahigh-risk pool, and less like atrue competitive exchange.And heres why thatsproblematic: If companies lose money, as they aregoing to, if you look at thesefigures and as the companiesthemselves anticipate, in fact, in some of the earlydisclosures these companies aremaking, youre starting to seethe forecast of losses. When these companies, if thesetrends continue, lose moneybecause not enough people underthe age of 34 signed up for themand not enough people signed up,under the law, under Obamacare,they will be entitled to apayout from the high-risk pool. And this is a program thats inplace for the first three yearsof these exchanges.

And what that means is ataxpayer-funded bailout of Obamacare.That means the taxpayers of theUnited States, your money, isgoing to go from your pocketinto the pocket of these privatecompanies.Now, what the private companieswill tell you is, Look, we bid onthis product when you told usthe rules were going to be this,but since then you have changedthose rules even more.And so what was already bad hasgotten worse.And there is not enoughawareness about this, but weregoing to be hearing about it inthe weeks to come.

As we get closer to the realitythat billions of dollars intaxpayer money is going to be used to bail out theseexchanges, there is going to begrowing outrage around thecountry, and people are going towant answers, and I hope mycolleagues are starting to thinkabout what we need to do.Thats why I filed the bill inNovember.Its called the Obamacare Taxpayer Bailout Prevention Act,and what it would do is it wouldeliminate this provision thatallows for the tax-fundedbailouts of these exchanges.

And this problem, as we getcloser to it, the numbers are asbad or worse than weanticipated.So in the months to come, hereis what you can expect to see: First, you can expect to seethat companies are now going tosay, Well, we need our money.Under the law, we were promisedthis high-risk, this bailout.We signed up for it under thatassumption.Now we need taxpayer money.

And I predict the second thing youre going tosee is, going into next year, ascompanies begin to prepare their filings for next year,some companies are going todecide were not participatingin Obamacare exchanges next yearat all, which means there isgoing to be less choices andless competition, and thereforehigher premiums.Other companies are going to saywell participate, but only atthese premiums, and theyregoing to be significantly higherthan the ones weve seen thisyear. Meaning it will be evenless affordable; meaning evenless people under the age of 34will sign up; meaning even moremoney will have to go from thetaxpayer to bail out theexchange.

Now, were still in mid-Januaryand these numbers could change,but nobody realistically expectsthem to.In fact, I have yet to hear fromanyone knowledgeable about thissubject who has said to me, Oh,dont worry, in the next eightweeks, another 5 million or 6 million people will sign upand were going to get to over 30 percent ofnational enrollees, were going to get toover 38 percent of the people signingup being in the demographic of34 or under.

So its only mid-January, but Icome to the floor today to soundthe alarm that this is coming, sothat people across this countryknow that we are on the verge,we are weeks and months awayfrom transferring potentiallybillions of dollars fromtaxpayers to private companiesto bail out these exchanges.And I promise you this will notbe the last time you hear aboutthis. And I encourage my colleagues, asthey go home on this recess andtalk to people, get informedabout this subject becauseyoure going to be hearing a lotabout it in the weeks and monthsto come.

This is a very serious threat tothe law itself, by the way.This is unsustainable.At a time when we have a$17 trillion debt, when so manyAmericans are struggling to findemployment that pays them enoughto live off, when so manyAmericans have seen the jobsthey once had disappear andcannot find a job to replace it,when so many Americans arestruggling with the growing costof living inevery aspect of their lives -- child care, student loans,utility bills, you name it.To be told that at a time whenall of these challenges arehappening in the personal economyof so many people, thatbillions of dollars of taxpayermoney is going to go to bail out thislaw, there is going to becollective outrage across thepolitical spectrum in thiscountry, and rightfully so.

And here is the last point Iwould make, and then Ill close.If this law has to be bailedout, its one more reason why itdoesnt work.These exchanges were supposed tobe private, competitivemarketplaces where companiescould actuarially and soundlyprice a product and sell it atan affordable rate.That is not where they areheaded.We are headed toward a day,soon, as early as next year, and you will see the filingsthis year, when thesecompanies are going to decideeither not to participate or toparticipate but only if they cancharge substantially higherpremiums, with higher co-payments, and higher deductibles.And on top of it, the only waytheyll participate is if theyare promised this bailout.

We are going to hear a lot aboutthis in the weeks to come, and Iencourage my colleagues,irrespective of how you feelabout this law, I cannot imagineany of us believing that we areat a time in our nationshistory, given the challenges weface now, where we should bebailing out this plan withtaxpayer money being transferredto private companies to keepthem in business.But thats where were headed, and we better be able to dosomething about it soon becausepeople are not going to standfor it.

After four terms in the Florida House, including serving as speaker, Rubio was elected to the U.S. Senate in 2010.

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