Welcome Instapundit readers. To augment the depressing and worrisome message in this post, I suggest you read this article showing how we can restore market forces to our government-dictated healthcare system.
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I hate to dredge up bad memories so early in a new year, but we need to remind ourselves of the awful TARP bailout of 2008.
Our financial system had gone out of whack because of bad monetary policy from the Federal Reserve and unsustainable housing subsidies from Fannie Mae and Freddie Mac.
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.
Charles Krauthammer warns us about what may happen in his Washington Post column.
…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.
At this point, you may be wondering why there’s bailout language buried in the Obamacare legislation.
The simple answer is that politicians always love to accumulate power, and the insurance industry probably lobbied very hard to get this back-door access to our money.
But 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.
First, it postponed the employer mandate. Then it exempted from the individual mandate people whose policies were canceled (by Obamacare). And for those who did join the exchanges, Health and Human Services Secretary Kathleen Sebeliusis “strongly encouraging” insurers — during the “transition” — to cover doctors and drugs not included in their clients’ plans. The insurers were stunned. Told to give free coverage. Deprived of their best customers. Forced to offer stripped-down “catastrophic” plans to people age 30 and over (contrary to the law). These dictates, complained an insurance industry spokesman, could“destabilize” the insurance market.
So what does all this mean? It’s not good news for Big Insurance.
Shrinking revenues and rising costs could bring on the “death spiral” — an unbalanced patient pool forcing huge premium increases (to restore revenue) that would further unbalance the patient pool as the young and healthy drop out. End result? Insolvency — before which the insurance companies will pull out of Obamacare. Solution? A huge government bailout. It’s Obamacare’s escape hatch. And — surprise, surprise — it’s already baked into the law.
This sounds depressing, but Krauthammer suggests that there could be a way of derailing a bailout before it begins.
…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.
I hope his political judgement is correct, though I suspect the statists (and their echo chamber in the media) would portray any effort to amend the debt limit as a sore-loser attack on Obamacare.
But if it’s a simple no-bailout message, perhaps that would be sufficiently popular to overcome the political establishment. As Krauthammer points out, the legislation could be very simple: “Sections 1341 and 1342 of the Affordable Care Act are hereby repealed.”
Let’s close today’s post with some good Obamacare cartoons. We’ll start with Eric Allie’s amusing look at how the White House is measuring success.
Nice gimmick, huh? You pass a law that destroys people’s existing insurance policies, then you claim victory when some of them sign up for more expensive Obamacare insurance.
Next we have Nate Beeler welcoming the new year.
Chip Bok’s cartoon is somewhat optimistic in that he’s suggesting that Obamacare may unravel.
And Gary Varvel mocks the moving goalposts of Obamacare.
Lisa Benson congratulates the President for winning Politifact’s Lie of the Year Award.
Michael Ramirez hints that the President may not be in a position to enjoy his multi-million dollar Hawaiian vacation.
Last but not least, Scott Stantis warns us that Obamacare violates the Hippocratic Oath about doing no harm.
P.S. Under no circumstances should you feel sorry for the insurance companies. As I noted the other day, they endorsed Obamacare and actively lobbied for its passage. They deserve every bad thing that might happen to them.
P.P.S. It’s hard to find much humor in this situation, but perhaps this funny “bailout application” could be updated to make it easier for big insurance companies to rape and pillage taxpayers.
International Liberty 
[…] Republicans and Democrats have provided special favors to Wall Street, General Motors, airlines, health insurance companies, Boeing, Big Pharma, and […]
[…] Now that it’s clear that the mandate isn’t working very well and that increased Medicaid dependency accounts for almost all of the additional “insurance coverage,” they’re left with an increasingly dysfunctional system. As far as I’m concerned, they deserve to lose money. And I definitely don’t want them to get bailout money. […]
[…] P.S. None of this suggests we should feel sorry for health insurance companies. They got in bed with the previous administration and endorsed Obamacare, presumably because they figured a mandate (especially with all the subsidies) would create captive customers. Now that it’s clear that the mandate isn’t working very well and that increased Medicaid dependency accounts for almost all of the additional “insurance coverage,” they’re left with an increasingly dysfunctional system. As far as I’m concerned, they deserve to lose money. And I definitely don’t want them to get bailout money. […]
[…] P.S. None of this suggests we should feel sorry for health insurance companies. They got in bed with the previous administration and endorsed Obamacare, presumably because they figured a mandate (especially with all the subsidies) would create captive customers. Now that it’s clear that the mandate isn’t working very well and that increased Medicaid dependency accounts for almost all of the additional “insurance coverage,” they’re left with an increasingly dysfunctional system. As far as I’m concerned, they deserve to lose money. And I definitely don’t want them to get bailout money. […]
[…] these corrupt firms even got a provision in the law promising bailouts from taxpayers if the Obamacare system didn’t […]
“why there’s bailout language buried in the Obamacare legislation” – Well, one obvious reason is that seeing the ACA forces insurers to insure “houses on fire” will upset all actuarial calculations. There are only three options: a health plan will have to be closed and abandoned once it attracted too many seriously ill patients who all pay less than they require in payouts, or the insurer goes bankrupt or it is propped up, aka bailed out, with money that is redistributed from another source.
well the wai i see it is thislets don,t talk about this or any thing else stops rachet jawing and take action to take all of the obama adminastrtion to the death penatity and no question just take actions. see less talk and more actions. and also i knoiw i can chargethem all for traders, treason, murders. and industrial espong. their in only for themselves. that also includes trader john kerry, mechelle, bill and hillary clinton joe bidon. now lets kick some butts.stop talking take actions. action speak louder the words.
This is exactly what happens when a President is forced to let the insurance companies(corrupt institutions) be ACA players. Things will eventually right themselves. We WILL raise taxes appropriately. We WILL catch up to the rest of the modern world, and move to a single payer system. We WILL taek the power away from the insurance companies, and their lawyers.(ALL lawyers would be best -what the hell makes them so ‘special’ anyway?) The lrgacy of this President will be in place-despite the petty, schoolyard immaturity of those trying to stop his every move.
i want to know is why is this idiot still in office? you all knew what was coming and still their has been no action.look if i was doing your job this idot including hillary and bill clinton, oparha whipfree would be in prizsonor put to death due to he is a trader, espenoage, terrious. but you are lets him ddestroying this country, this also mechelle, included. if i was doing your job everything would done by now. youal pussy foot around now lets get this done wants and for.all.i tell you in the old army this bs. would never happen,
Anyone with a BRAIN knows Obammycare to be a MASSIVE PILE of WORTHLESS GOOD for NOTHING FECAL MATTER just like Obammy. Thinking is not needed or wanted by those pushing Obammycare and Obammy IGNORANCE. Obammycare is a waste of everything and thinking won’t change that FACT.
people wake up. the government can not run a business????. example postal, the fed. gov. now the insurance business. how can this be possible, you can not borrow yourself out of debt.
Read the whole bill, full of pork. Wait til homeowners hve to pay a tax when they sell their house to the IRS. Voting on a bill which nobody bothered to read, stupid, if u voted for Obama, shame on you. He has created class warfare in the hopes of an uprising & what next Marshall law & our democracy as we know it will be lost, hence a Dictator. Read abt Progressive Insurance owned by Soros, who is guiding Obama, his agenda Socialism/ Communism call it what u want, scary & the tip of the iceberg. Obama is the Manchurian Candidate! May God Bless America!
[…] insurance companies that pushed for Obamacare will be destroyed by it, and I’m OK with that. Deal with the devil and all that. I pay cash for healthcare and my […]
Sorry to say – Old news
and NOT reversible because no D will let ACA get taken apart and re-written to that level
just passing a law to un-pass a part of a law does not work –
and the section includes the MLR rule –
the one touted as giving insured refunds on premiums
it is also std FEDERAL law – standard in most laws that are passed that include economic risk
ACA just clarified the terms of how existing federal law applies inside of ACA
this bail out was discussed in 2011/12
when no one wanted to listen, and anyone who spoke out against ACA was called racist
in ACA it is defined as a Risk Corridor
and is intended to make insurers whole IF THE RATES THEY WERE FORCED TO USE were not enough to cover the costs incurred
It also forces a repayment if premiums collected exceed the 20% MLR rule
I say FORCED TO USE, as all Exchange rates were subject to state and HHS review, adjustment and approval.
many states FORCED lower premiums – as much as 35% REDUCTIONS
sidebar
HHS is so bad at predicting rate to cost – PCIP was 4x as expensive on 1/3 as many enrolled – and it went bust 10 months early
here is a review from about 2012
http://www.rwjf.org/content/dam/farm/reports/issue_briefs/2012/rwjf72568
The hatred insurers have of ACA is only kept in check by gag orders
consider –
any insurer knows how many policies they sold each and every day
any insurer knows how many policies they ISSUED each and every day
and every broker and agent knows withing 24 hours if a policy is issued
so why can no one find out
how many were sold
or
how many were issued
in the last 3 months?
Insurers were on board until the regulations were issued
they stated bailing out late 2012 and early 2013
in some areas HHS had to beg to get a single insurer to participate
One state has ONE insurer willing to stay – and they almost left the state in November 2013
I see the notices as the insurers tell us they are not or are accepting policies – and many issued notices
While I understand the points made about insurance companies collaborating in the deal, what you are excusing is textbook cronyism. They are rigging the game to make it a win-win for themselves; the only inevitability is that the middle class will get screwed one way or another. Should the companies that lobbied for the light bulb ban be given a pass because they were facing the inevitable, even though they used the opportunity to fatten profits at our expense? If everyone uses the government as a tool to screw their neighbor, eventually government favor becomes the only determinant of success. Everyone who cheats will claim they were bribed or cajoled. They need to be treated with the same disdain regardless of their reasons because they knew they were taking advantage of us using the law.
I have to disagree with those expressing sentiments in favor of the insurance companies. They had the option to keep out of this business and they chose to jump in. If you believe in crony capitalism, you have to be willing to suffer the consequences when your government cronies stick it to you. If you believe in free markets, you have to be willing to accept the poor decisions you made. Either way, the insurance companies deserve to eat any loss they are going to face, and these losses will NOT end up being existential threats, just very bad one-year losses.
TARP funding was repaid by the banks but not the auto companies. Whatever is sent to the health insurers is just gone forever, as is the “investment” in food stamps,
However, it is certainly not reasonable to call the insurers corrupt because they will receive money from the government. They could not know what the book of business would look like or project claims. Neither could they know that Obama would waive enrollment for a wide sector of the healthy population or what the other regulations would become. Without the assurance of government support they could not have been involved with what has become a very costly and damaging experiment.
While TARP was sub-optimal, it needed to be done. The problem was that the commercial paper market was about 24 hours from freezing up. This would have caused a lot of other companies to crater, because they would have been unable to make payroll, pay suppliers, etc. Credit cards would have stopped working. The shockwaves would have been big. Megan McArdle blogged about it at the time.
In addition, the FDIC resolution process in not as straightforward as you think. (I’ve lived through it.) There are two ways to “rescue” a failing bank. In some cases, the failing bank’s deposit accounts are moved to a new bank, along with performing loan, etc. To the customers of the failed bank, there is a day or two where checks don’t get processed and you eventually need new checks. Works well if the failing bank is not dead and you have some healthy banks out there to absorb the failing banks, as well as some time to do the transfer. This is what the RTC did when the real estate crisis/oil price collapse hit in the mid 80s. But if the bank is truly dead, and as was true in the TARP timeframe, you don’t know what banks are healthy, you can liquidate the bank. Accounts are frozen, and you have to wait a week or two to get your money from the FDIC. It happened to a bank I had an account with in the 70s – they failed because of a run caused by a political scandal.
With TARP, there wasn’t time to sort it all out without the entire financial system coming to a halt for a qood while. Heck, they even made a couple of the big banks take TARP money when they didn’t need it, so that no bank would be seen as “better”, so as to head off runs.
As for the current bailout of the insurance companies – Congress should look long and hard about making money available…..
While I agree that Big Med in any form ‘cooperated’ in this whole Potemkin Village I have to say that the alternative for them might have been much worse. My company was recently shanghaied out of a brokered deal with another company by the power of the Federal Trade Commission. The federal government has the upper hand in any deal and these medical insurance companies just migh have been threatened to go along. It still is not really not an excuse, but…
@NormD, the $20B is what they are collecting in the first 3 years with the $65 “Fee”. The Taxpayer is on the hook for 80% of all losses the insurance companies suffer. If only old and sick people sign up, at reduced premiums this will be a lot bigger number than $20B.
Reblogged this on angryid.
What can one say about a balloon in a bramble patch ?
It does not matter where the first thorn goes in.
Our overinflated socio/economic/political system
is bound to explode, sooner rather than later,
and the sooner the better; Fail, Obamacare !
TARP was $700B. This program is $20B. Whether one likes or dislikes the program, how is it worse than TARP?
“These companies employ literally hundreds of thousands people and if they go down because of something beyond their control it will send some serious shockwaves all across the business sector.”
Indeed. Furthermore, for many who don’t think critically, it will lend credence to the argument that, “private insurance has failed, so single payer is now the only solution” (neglecting that the “private” insurance was strangled by the government over decades, Obamacare simply being the last straw).
I wouldn’t characterize the insurance companies actions as “getting in bed with the administration”. It was more a case of they saw the inevitability of what was happening and they wanted to make sure they were protected when the whole house of cards collapsed. In the run up to the final vote the insurance companies provided all kinds of data and warnings to congress, often at their behest, that predicted just such an outcome. Nancy Pelosi and the Democrats instead of heeding these reports chose instead to demonize them. These companies employ literally hundreds of thousands people and if they go down because of something beyond their control it will send some serious shockwaves all across the business sector.
“I would view their involvement as reading the “tea leaves” that it was coming and if they didn’t get involved the outcome wouldn’t be good. ”
If they didn’t want it, they shouldn’t have lobbied for it. I suppose you excuse Romneycare as something the man had to be involved with creating, because Democrats run Mass?
What government should not attempt should only be opposed, not accommodated.
If Romney was an actual conservative, so having that wisdom, he likely would be President…except the Establishment GOP would have made sure he wasn’t, then.
The insurance companies are not victims here, they helped create this mess. They should drown by the millstone they carved for the people, and creative destruction ensue. Very hopefully, wealth and career destroying destruction for the mismanagers who participated in creating this situation.
Just make sure that you don’t have any residual sympathy for the pharmaceutical companies either. They’re just as guilty as the big insurers.
[…] TARP Was Bad, but the Looming Obamacare Bailout for Corrupt Insurance Companies Could Be Worse […]
Or maybe Obama, and the oligarchy, really want a single payer and that where this debacle could lead. In which case, the whole Obamacare program is actually well on track…
While I nearly always agree with your opinions. Not sure that I agree with this one. Yes, insurance companies were part of this law. I would view their involvement as reading the “tea leaves” that it was coming and if they didn’t get involved the outcome wouldn’t be good. There is a the ACA charge of $63 per policy that goes into a pool. There are reasons why they would lobby for this.
1) Loss of underwriting – they have to take anyone who applies. The offset has always been that everyone is required to purchase insurance. Reality is that the biggest users will be the first to buy and the young and healthy (who saw the largest rate increase) will be the last. There is no guarantee that enough healthy people will pay in.
2) The Medical Spending Ratio – which forces insurance companies to return “excess revenue” to policy holders. A natural part of how insurance companies operate is they have good and bad years. The good years offset the bad years. Under this law, then they can’t recuperate losses sustained in bad years.
While I agree with you that I don’t feel sorry for them. To characterize this law as something they wanted is a stretch.