Friday, December 26, 2014

Unworthy OGR oversight of health insurers' bailout

This is a continuation of yesterday's entry Projecting Palmer: Oversight and Government Reform.

In July of this year, the  House Oversight and Government Reform Committee issued this report: ObamaCare’s Taxpayer Bailout of Health Insurers and the White House’s Involvement to Increase Bailout Size.

Below is the conclusion of the report:
IX. Conclusion
While the President’s rhetoric during the debate leading up to ObamaCare’s passage was
largely critical of insurance companies and inconsistent with his Administration’s closed door relationships with health insurers, ObamaCare contained key provisions to increase insurance company profitability. In addition to providing health insurance companies with a mandate that individuals purchase their product as well as providing expensive subsidies for people to purchase coverage in exchanges, ObamaCare provided several other competitive advantages for insurance companies offering ObamaCare-compliant coverage in health insurance markets. This report discussed two of these provisions: ObamaCare’s Reinsurance program and ObamaCare’s Risk Corridor program.
In 2014, through ObamaCare’s Reinsurance program, nearly 191 million Americans are
forced to pay $63 each to subsidize lower premiums for ObamaCare-compliant policies. In addition to the large payments insurers are scheduled to receive through ObamaCare’s Reinsurance program, most insurance companies currently expect to receive an additional bailout, funded by taxpayers, for their ObamaCare-compliant plans. Based upon the information obtained by the Committee, it would not be surprising if taxpayers end up bailing out companies that offered ObamaCare-compliant plans on the exchanges about $1 billion in 2014 alone. Additionally, Professor Chandler testified that his models show that taxpayer liability through the Risk Corridor program is “most likely in the billions of dollars,” meaning taxpayer exposure could be even greater.
Due to political pressure from the plethora of news stories about individuals losing their health insurance coverage last fall, the Administration issued their so-called transitional policy, which allowed non-ObamaCare compliant plans to be renewed for an additional year. In order to ensure that insurers that offered ObamaCare-compliant coverage were not harmed by the Administration’s unilateral action, the Administration increased the generosity of the Risk Corridor program.
In March 2014, after the Administration suggested that it would implement the Risk
Corridor program in a budget neutral manner, insurers and their lobbyists threatened that forcing budget neutrality on the program would mean much higher premiums in exchange plans in 2015. In early April 2014, the Administration attempted to clarify the Risk Corridor budget neutrality with Valerie Jarrett communicating to an insurance company CEO that the Administration had delivered 80 percent of what the insurers sought. However, the Administration was not finished making the Risk Corridor program more generous to insurers and more dangerous to taxpayers. In May 2014, the Administration adjusted the risk corridor formula to increase the chances that insurers would receive money through the program and to increase the amount of money that insurers would receive.
While the Administration’s changes to the Risk Corridor provision protected the profits
of insurance companies’ ObamaCare-compliant plans, it was extremely detrimental to taxpayers. According to the information obtained by the Committee, the industries’ expectation for the size of the taxpayer bailout has increased by more than a third since October 1, 2013.
Taxpayers should not be forced to bail out insurance companies that made poor strategic
decisions pricing their ObamaCare-compliant products in the individual market. When
government picks winners and losers in the market, it reduces competition and harms consumers. Congress should protect taxpayers and bring greater transparency to the premiums in the individual market by repealing ObamaCare’s Risk Corridor program.

The taxpayer protection purpose exhibited above is consonant with the mission statement of the Oversight and Government Reform Committee, which I quoted in Projecting Palmer: Oversight and Government Reform, to wit:
First, Americans have a right to know that the money Washington takes from them is well spent. And second, Americans deserve an efficient, effective government that works for them. Our duty on the Oversight and Government Reform Committee is to protect these rights.
The question for Representative-elect Palmer (and for voters and taxpayers in the Alabama 6th Congressional district) is whether the Report gives a satisfactory explanation of why ObamaCare contained the health insurer bailout provisions which the Report criticizes.

Congress passed the law, and so why did Congress put the provisions in the law. Or, in other words, why did Congress do so much of the bidding of the health insurance companies?

I think many people believe they know the answer to the question, and the answer is that such is the way the influence of money and campaign contributions in our political system works, and, in particular, campaign contributions of "special interests."

In my campaign, I tried to articulate the problem of "special interests" this way: Lawmakers are confronted with legislative matters in which there is a general societal interest on more than one side of a matter, and regarding which there is also a one sided, special interest of a small group. I tried to say that the job of the lawmakers is to decide where to strike a balance concerning the general societal interests that are on more than one side of the matter, and to accord little or no weight to the one sided, special interest of the small group.

This is laid out, with examples, in Birmingham's Future For Young Professionals.

One of the examples I gave was that of health care and health insurance companies.There are general societal interests of having affordable and quality health care. One one hand, society may need for the delivery of the same financially robust health insurance companies. At the same time, a determination might be made, for example, that affordable and quality health care could be best done by having only catastrophic health events dealt with by means of an insurance vehicle, and for the routine health matters to be kept outside of the insurance vehicle. Health insurance companies have a special, one sided interest in having more, rather than less, health care brought within the insurance vehicle. If the lawmakers are making decisions about how health care should be set up in the country, they should do so based on trying to achieve the general societal interests, and should largely disregard the desire of health insurance companies to put more, rather than less, of health care under the insurance vehicle. These may mean lesser employment by the health insurance companies, and lesser compensation in the executive ranks of health insurance companies, but that should not been given a great deal of weight by lawmakers.

The democratic form of government has an unfortunate problem. It is a problem which gets bigger, the bigger government gets, and the more government exercises its powers of taxation, spending and regulation in ways affecting the economy and economic activities.
This problem is that economic actors will understandably fixate on the small niche in government and the laws that most affects them. Very large amounts of money are at stake for them in their respective narrow niches affected by laws and governmental action, so they contribute and spend lots of money to make sure the they will be ok in how governmental action affects them in their particular narrow niche. One economic actor does not care about what a non-competing economic actor wants or gets in different niche, so numerous economic actors can make contributions to the same candidate, and the latter, if elected, can do the bidding of multiple economic actors.
There are hundreds of potent one sided, special interests, which are hard at work in Washington. They employ tens of thousands of Washington lobbyists to scurry around every day staying on top of Congressmen about thousands of details in hundreds of legislative bills in which the lobbyists' clients have special one sided interests, which the clients are will to pay their lobbyists to advance.
Next throw into the mix in this bad scenario the realities of the large amounts of money that are needed for politicians to get elected, and fund raising needs to be done continuously. The readily available source is the lobbyists and their clients with the one sided special interests.
So what is the upshot here?
The United States winds up with hundreds and thousands of pages of laws turned out each year by Congress which are convoluted and contorted in mind boggling ways to accommodate all the foregoing economic actors with their one sided, special interests. Little common sense attention is paid to what will work best to serve general societal interests of the American people.
My view is that the report ObamaCare’s Taxpayer Bailout of Health Insurers and the White House’s Involvement to Increase Bailout Size is very unsatisfactory in giving an explanation of of why ObamaCare contained the health insurer bailout provisions which the Report criticizes. Without such an explanation, I consider the House Oversight and Government Reform Committee's work unworthy of the American people, and the Committee will fail to protect the taxpayer rights its mission statement talks about.

Based on his past non-responsiveness, I don't think Representative -elect Palmer will make any response to what I say here. Voters and taxpayers in the Alabama 6th Congressional district will need to decide for themselves about whether to complain to Representative-elect Palmer if they think he is not going to serve them satisfactorily.

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