Author: James

The Looming Tsunami of Discontent with Obamacare

Win or lose Halbig, Obamacare wars will continue.

Shikha Dalmia | August 5, 2014

No matter how you feel about Halbig vs. Sebelius—the recent decision that said it was illegal for the government to funnel subsidies to the 36 states that declined to build health care exchanges—the odds that this legal challenge to Obamacare will ultimately prevail in the courts are not that high. But the law’s supporters should brace themselves for even fiercer future battles: Their folly was to pass a complicated and flawed law with zero Republican support, and now they have to contend with full-bore Republican opposition as they try to make it work.

Halbig’s odds of being upheld are low, not because its legal argument is “stupid” or “criminal,” as its opponents claim, but because of courtroom politics. Halbig was issued by a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit, but the full court tilts heavily liberal, and it is likely to reverse the decision.

Opponents of the law petitioned the Supreme Court last week to rule on the legality of the subsidies while the lower courts are still split. But the politically squeamish Chief Justice John Roberts might prefer to let matters play out at that level rather than jump into a partisan mud fight. (Theoretically, the four conservative justices would be enough to grant certiorari, but unless they know that Roberts will rule with them eventually, they wouldn’t risk egg on their face.)

But that doesn’t mean that Obamacare supporters can take a victory lap. The program’s biggest vulnerabilities are still down the road. And that’s no accident.

The administration postponed implementation of the more painful aspects of the program till after the president is safely out of office—partly through the original law and partly by altering the law through executive fiat.

Thanks to lobbying by labor, the law delayed taxing so-called Cadillac Plans, which benefit union households, till 2018. Likewise, it doesn’t require states participating in the Medicaid expansion to pick up any of the tab for their added costs till 2016.

The penalty for the individual mandate, which starts at $95 per individual and $285 per household, will soar to $695 and $2,085, respectively, by 2016.

But the real danger is the “risk corridor” provision that was meant to backstop the losses of insurance companies so that they don’t pull out, prompting Obamacare’s collapse.

“Risk corridors” essentially cap both the profits and losses that insurance companies can make. A company whose profits are higher than the capped amount has to fork over the excess to one that incurs losses.

In theory, this program, which is also due to expire around 2017, is supposed to be financed by the insurance industry. But the problem is that if the industry as a whole doesn’t make enough profits to offset its losses, then a federal bailout may be necessary when these programs are phased out and their final bill comes due.

The likelihood of a bailout is not as remote as liberals claim, given that 71 percent of the exchange enrollees are older and not as healthy, about 11 points more than optimal according to the administration’s own projections. Indeed, even before many insurersreported lower-than-expected earnings this week, Moody’s had downgraded its outlook for the industry to “negative.”

But the insurer bailout is not the only appropriation battle brewing. In the fairytale that the president told the public, Obamacare wasn’t going to cost taxpayers a “dime” because all of the necessary funds would be obtained from drastic Medicare reimbursement cuts to doctors and hospitals. How drastic? So drastic, notes Forbes analyst Chris Conover, that by 2030 Medicare would be paying providers 60 percent less than what private plans do.

https://reason.com/archives/2014/08/05/the-tsunami-of-discontent-with-obamacare