ObamaCare’s Strange Bedfellows

Obamacare has what’s called a risk corridor. Basically, it’s a formula for making good losses insurance companies might incur if they misprice their policies or the insurance pools turn out not to match up properly with their models. The risk corridors assumed that some would make “excess” profits and some would suffer unanticipated losses. The winners are required to fork over some profits which are to be used to fund the losers. If you really want to dive into this, here’s one place to go. Suffice it to say it’s complicated.

Anyway the risk corridors are vaguely defined in the bill and subject to interpretation. Conceivably, all insurance companies could end up screwing up and losing money, at least at the outset, and in that case the make good money comes from the federal government not a transfer of money from one private insurance company to another. Now the problem is that the way things are going conceivably might become probably. To put it impolitely, the taxpayer will be bailing out the insurance companies for either bad underwriting or low balling their offerings for … well you insert your own reason here.

Enter Marco Rubio who is offering a new bill which will eliminate the risk corridor. The chances of it passing are close to nil and even if it did the veto pen would await. Nevertheless this affair raises a rather amusing set of circumstances. Arnold Kling summarized it well.

So now you have the Obama Administration desperately trying to make government the friend of the insurance industry and a Republican Senator desperately trying to stop that from happening.

Ok, I can’t stop myself, cue the groan machine because here it comes, “Politics makes strange bedfellows.” Or if you prefer, “Human sacrifice, dogs and cats living together… mass hysteria!” Courtesy of Ghostbusters, of course. One suspects that this is not the last reversal of roles were likely to see.

About Tom Lindmark 401 Articles

I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time.

Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so.

Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy.

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