Why Congress Shouldn’t Pass an Insurer Bailout
The more things change, the more they stay the same. Even as the nation (and the world) grapples with the coronavirus pandemic and a major recession, health insurers continue to come to Congress, hat in hand, seeking federal bailout dollars.
The health insurance industry recently sent a letter to congressional leaders, asking that the next round of virus-related legislation include — among other things — funds for employers to subsidize health insurance, a full subsidy for Combined Omnibus Budget Reconciliation Act of 1985, continuation coverage for laid-off workers, and richer subsidies on the Obamacare exchanges.
The letter echoes earlier campaigns by Washington interest groups to attach similar provisions to coronavirus bills this spring. But with this, as they held their ground over the spring, Congress shouldn’t give in. An insurer bailout would be a bad policy on multiple levels, constituting a wasteful and inefficient use of taxpayer resources.
Insurers Don’t Need the Money
The health insurance industry has made money hand-over-fist during the pandemic, as much medical care not directly related to the coronavirus ceased this spring. Even patients needing urgent care for conditions like heart attacks and strokes stopped going to the hospital. American hospitals also postponed an estimated 4.1 million elective procedures, all of which led to revenue losses of more than $100 billion.
In most cases, health insurers (unlike auto insurers) have not lowered premiums mid-year due to the pandemic. They continue to rake in cash, even as they pay out much less in claims. Yet insurers keep clamoring for federal assistance, going so far as to ask Congress to “ensure access to widespread testing for COVID-19 with federal funding” — so insurers don’t have to pay for tests out of their own rapidly filling coffers.
The contrast between insurers’ burgeoning bottom lines and their growing wish list for Congress led to this revealing exchange:
Asked whether insurers need action from Congress given their financial benefits from the cancellation of elective procedures, Kristine Grow, a spokeswoman for AHIP [America’s Health Insurance Plans], wrote in an e-mail that ‘it is too soon to know what the real financial impact of the virus will be.’
If you believe that, I’ve got some oceanfront property in Arizona for you.
Federal Subsidies Are Inefficient
In addition to throwing more money at an industry awash in profits, the proposals put forth by health insurers represent an inefficient use of taxpayer dollars. Providing specific federal aid for health coverage ensures the health care industry will have customers but doesn’t necessarily provide the most effective help for businesses or individuals.
For instance, a family in which one breadwinner lost a job might retain access to health insurance through a still-employed spouse but need assistance paying rent or other bills. A subsidy for COBRA insurance would not give the family the assistance they need most. Moreover, because COBRA insurance comes with very high premiums, federal subsidies for those plans may give families more coverage than they need or want, at a time they would rather use scarce resources on other, more pressing financial needs.
Dedicated federal subsidies for health coverage would give insurers what they care about most: guaranteed customers. But they would also “trap” dollars within the health-care sector, creating inefficiency when struggling businesses and families need the flexibility to make ends meet.
Taxpayer Funding of Abortion Coverage
The pleas of health insurers for bailout dollars went unheard this spring, a trend likely to continue so long as Republicans control the White House or Congress. Providing federal subsidies for COBRA coverage, or increasing federal Obamacare subsidies, will deliver additional federal dollars to health insurance plans that cover abortion—a non-starter for many pro-lifers in Congress.
In October 2017, I explained how a bipartisan Obamacare “stability” bill would subsidize abortion, because the bailout legislation did not include Hyde Amendment restrictions on taxpayer funding of abortion coverage. Many Republican lawmakers wanted to approve an Obamacare bailout, but they could not resolve this issue: Pro-life groups (rightly) insisted on strong Hyde protections, and Senate Democrats would not agree to any legislation that included the pro-life language.
It took nearly six months of lawmakers going around in circles, but Republicans desperate to bail out Obamacare finally threw in the towel in March 2018. Neither side had 60 votes in the Senate to overcome a filibuster, so the Obamacare “stability” bill got left out of a larger legislative package.
The same outcome seems likely regarding health insurance subsidies this summer, for much the same reason. Of course, much may hinge on Joe Biden, who last year reversed his decades-long support for the Hyde Amendment and now supports taxpayer-funded abortion-on-demand. If he wins the presidential election this November, Congress could face a very different story next year.
This post was originally published at The Federalist.