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The Liberals have long wanted a single payer health care system that would wipe out private health insurance companies altogether.
As such, it is incongruous that 113 so-called “Medicare for All” sponsors voted to increase government payments to profitable health insurers until the end of next year.
These same members of Congress appear poised to adopt a proposal from the Biden administration to make these increased payments permanent.
If Congress follows through on the request, it will be a gift of $ 200 billion from the federal treasury to profitable health insurance companies participating in Obamacare exchanges.
These insurers are already generously leveraging $ 50 billion in annual federal payments to subsidize Obamacare policies for low- and middle-income people.
In March, Congress approved a request to extend these payments until the end of next year.
According to the Congressional Budget Office, this $ 34 billion increase in government payments to insurers will do little to reduce the number of people without coverage.
Instead, the new spending will primarily benefit people who already have insurance, including wealthier households. For the first time, the bill would make people eligible for government bonus assistance regardless of their income.
President Joe Biden has proposed to make these provisions permanent. The same members of Congress who supported the temporary increase are expected to vote later this year to make them permanent.
Approving this proposal would be a godsend for insurance companies. The permanent expansion would allow insurers to collect $ 834 billion in taxpayer dollars over 10 years, almost $ 200 billion more than they would have received without the increase.
While the government pays these grants on behalf of the people who purchase swap-based coverage, the money goes directly from the treasury to insurance companies.
These federal payments are by far the biggest source of income for insurers selling through exchanges, a business that has become more lucrative as premiums soar. This is in part because the grants increase dollar for dollar with referral premiums. The higher the premiums, the more money government insurers pocket and the higher their gross margins.
As insurers struggled with their swap business during Obamacare’s early years, they turned to profit by increasing their premiums, knowing that the federal government would bear much of the additional costs for the beneficiaries of the premium subsidies.
Nationally, the average premium paid for individual coverage increased 129%, or more than double, between 2013 and 2019.
As the premiums increased, the margins increased with them. The average monthly gross margin per member for insurers in the individual market was $ 143 in 2020. This was almost 80% higher than the gross margin of insurers realized on their group operations, where networks tend to be. wider and less cost-sharing, and where government premium subsidies are not available.
Unlike their group activities, the lion’s share of insurance companies’ revenue in the individual trade-based market comes from government, not policyholders.
According to data provided by the Centers for Medicare and Medicaid Services, insurers selling in Obamacare exchanges collected an average of around $ 6.1 billion in monthly premiums during the first half of 2020.
Of that $ 6.1 billion, nearly $ 4.5 billion came directly from the US Treasury. Insurers selling via stock exchanges thus derive 73.8% of their income – and a large part of their profits – from taxpayers.
And that was before Congress ordered the Treasury to issue larger checks to insurance companies.
It’s no surprise that insurance industry lobbyists want more taxpayer dollars. What is surprising is that the Liberals in Congress are forcing them.
Many of them support a single-payer system, in which the government funds medical goods and services, dooming private health insurers to extinction. Increasing Obamacare premium subsidies would have the opposite effect, using federal money to make the insurance industry more profitable.
It is also possible that the Supreme Court would further complicate the matter. Judges are expected to rule in a week or two on the constitutionality of Obamacare’s individual tenure. If they cancel the warrant, the judges will also have to decide whether or not to cancel the rest of Obamacare.
If that were to happen, it would totally upset the president’s plans to expand the law. If that doesn’t happen, the Liberals in Congress will have to decide again whether they want to enrich an industry they previously promised to destroy.
This piece originally appeared in The Daily Signal.
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