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June 2012
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SURPRISE Obamacare bailout clause likely to hit taxpayers

Bet you thought we were through with big government bailouts. President Obama and Congressional Democrats have made a lot of political hay demagoguing that issue in the years since the financial crisis, TARP, and the politically unpopular bailouts of banks, insurers, and car companies. Won't happen again, we were told. Moral hazard, you see. Encourages too much risk-taking.

So it may come as a surprise to you to learn that an insurance company bailout was actually built into the darker reaches of Obamacare, a law passed exclusively by Democrats. And data released Monday suggests it is very likely to be triggered - unless Congressional Democrats facing a tough election year can be shamed into repealing the provision.

When Obamacare was passed, there was a fair amount of publicity about the socialistic aspect of the law that limited the profits health insurance companies could make on policies they sell through Obamacare exchanges. What was not publicized was the flipside of that provision, known as section 1342.

In addition to the profit limitation, section 1342 also created a loss limitation for insurance companies in the event that not enough young people bought policies to subsidize the below-cost policies insurers are required to sell to older and sicker people under Obamacare.

Well guess what. Figures released by the Department of Health and Human Services Monday suggest such a bailout is in the cards. HHS figures showed that of the approximately 2.2 million people who have signed up for coverage to date, only 24 percent are in the 18-to-34 age group. Analysts say that for Obamacare to work for insurers, 40 percent of those enrolling will have to come from the 18-to-34 age group. That's not happening. Not even close.

Republican Sen. Marco Rubio said Monday that the situation has been further exacerbated by the administration's reversal of policy amid the firestorm over the "If you like your insurance policy you can keep it" falsehood. He noted an SEC filing by one health insurance company saying the added burden of complying with that reversal means the company "now expects the risk mix of members enrolling through the health insurance exchanges to be more adverse than previously expected."

Translation: We're heading for a taxpayer bailout. The law, Rubio says, requires the government to make good on 80 percent of all losses insurance companies incur selling policies to the older, sicker age groups if Obamacare's financial assumptions fail to play out.

Rubio has filed a one-page bill that would repeal the bailout provision. He'll probably have a tough time getting that one through the Senate, but it is likely that the GOP-controlled House will pass a similar measure and send it to the Senate, at least to make the political point.

Columnist Charles Krauthammer, writing in the Washington Post several days ago, proposed an even more interesting idea - attach a repeal of the bailout provision to the upcoming debt limit bill. Politically, that would be pretty shrewd.

But it's small consolation for taxpayers. The real problem with Obamacare is that with each passing day it seems increasingly certain to collapse financially. When it does, either taxpayers or insurance companies are going to get stuck with the bill. As the law presently stands, taxpayers will shoulder the bulk of the burden.

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