Will we be bailing out the insurance companies?

Megan McArdle has the latest:

This is the plan that Republicans hope to cleverly foil by framing the risk-adjustment provisions [of ACA] as an insurer bailout and repealing them. As designed, the risk-adjustment mechanism was supposed to be revenue-neutral, and that is how the Congressional Budget Office scored it in their last estimate. But unless the demographics of the exchanges improve pretty quickly, the three temporary risk-adjustment programs are probably set to transfer a large hunk of cash to the insurance companies. That’s what the administration, and the insurers, want to happen; it’s how they are going to keep the insurers on board for 2015. Phil Klein at the Washington Examiner points out that Humana Inc.’s latest filing with the Securities and Exchange Commission warns of a “more adverse than previously expected” mix of customers enrolling through the exchange — but it doesn’t change its earnings forecast for 2014. So either it thinks its losses will be trivial relative to overall earnings or Humana thinks the chances of a bailout from the administration are basically 100 percent.

There is more here, including background context if you are not up to speed on this issue.


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