Trump administration halts billions in slush fund payments to Obamacare insurers

One of the most objectionable parts of the Obamacare law has been "risk adjustment payments" to health insurers who can't make money selling Obamacare insurance policies.  The federal government hands out cash to these insurance companies, to "stabilize" the health insurance market.  In essence, the payments are outright bribes to companies to continue selling Obamacare policies and keep the insurance exchanges afloat.

On their own, subject to ordinary market forces, most of the companies would have bolted the exchanges long ago.

Now the administration has halted more than $10 billion in risk adjustment payments, citing a court decision that said the government was using an incorrect formula to figure out how much taxpayer money should be doled out.


The payments are intended to help stabilize health insurance markets by compensating insurers that had sicker, more expensive enrollees in 2017.  The government collects the money from health insurers with relatively healthy enrollees, who cost less to insure.

CMS, which is overseen by the U.S. Department of Health and Human Services, said the move was necessary because of a February ruling by a federal court in New Mexico, which found that the federal government was using an inaccurate formula for allocating the payments. ...

A federal court in Massachusetts upheld the same allocation formula in January.

The CMS statement said the agency has asked the New Mexico court to reconsider its decision and expressed hope for a prompt resolution of the issue.

The problem for all insurers is that most of those buying Obamacare insurance are older and sicker than the optimistic (many believe deliberately over-optimistic) estimates made by the Obama administration when selling the ACA to Congress and the people.  It was part of the con that President Obama foisted upon the public.  Obamacare policies are so expensive – even with subsidies – that most healthy people refused to buy them.  The predictable result was that insurance costs are skyrocketing, not because Republicans have "undermined" Obamacare, but because the program itself started life fatally flawed.

There is a moral hazard to rewarding companies for losing money.  Halting this odious practice may cause more companies to leave the exchanges, which is something they would have done in the first place if ordinary market forces had been in place.

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