Graboyes: "ObamaCare Will Enrich Insurers At Taxpayers' Expense"
Robert Graboyes, a senior research fellow with the Mercatus Center at George Mason University and professor of health economics at several universities across Virginia and DC, explains how ObamCare’s mathematical formula to calculate individual subsidies incentivizes insurance companies to raise premiums and increase required services just to receive higher subsidy payments from the U.S. Treasury.
The winners of this game: the insurers, doctors, hospitals, and drug companies
The loser of this game (as always): the American taxpayer
IBD Editorials: Perspective
ObamaCare Will Enrich Insurers At Taxpayers’ Expense
By ROBERT F. GRABOYES
Posted 10/11/2013 05:34 PM ET
The Affordable Care Act may give health insurance companies a virtually limitless power to tap the U.S. Treasury, thereby lifting insurers’ profits to undreamt-of heights. This power derives from the mathematical formula for calculating individual subsidies.
The subsidy formula promises, for example, that a family of four with $30,000 in income will pay no more than 2% of that income (or $600) for its health insurance.
If an insurer charges $10,000 for a family policy, then, the family will pay $600 to the exchange, and the federal government will pay the remaining $9,400.
Under the medical-loss-ratio (MLR) rules, the insurer is entitled to retain 20% of the $10,000 (or $2,000) for overhead and profits.
Now here’s the trick: If the insurer raises the premium to $20,000, the family still pays only $600. However, the U.S. Treasury will now pay the insurer a subsidy of $19,400 — and now, the insurer is entitled to retain 20% of $20,000 (or $4,000) for overhead and profits.
Insurers will be humming the chewing gum jingle, “Double your pleasure, double your fun.” Read more…