A conservative group is trying a new tactic to gum up the works on Obamacare: publicly shaming insurance companies into refusing federal money that's designed to keep premiums affordable. If this is what the law's opponents have been reduced to, the Affordable Care Act is going to be just fine.
The National Center for Public Policy Research, which bills itself as a communications and research foundation that supports the principles of a free market, issued a news release this week announcing that the chief executive officer of Humana Inc. "declined to promise that the health insurance industry giant will reject taxpayer bailouts."
Two things make that an odd statement. First, successful companies tend not to require government bailouts. Humana, like other big health insurers, is doing great, its share price having significantly outperformed the Standard and Poor's 500 Index since the Affordable Care Act was signed in March 2010:
But then, the center didn't mean "bailout" the way most people use that term. It was referring to provisions in the law that are designed to protect health insurers against financial loss if the people who first sign up for policies through the state exchanges cost more to cover than the insurer anticipated. The provisions, generally known as the three R's (risk corridors, reinsurance and risk adjustment), are mostly funded by insurers themselves, with the chance for some government funding.
Which brings us to the second interesting point about the center's news release: Why would a company voluntarily decline federal money to which it was entitled by law, which is designed to serve a purpose (keeping premiums reasonable) that most everyone supports? When I asked that question, here's what David Hogberg, a health-care-policy analyst at the center, responded in an e-mail:
Taxpayer bailouts are anathema to most of the public, right, left and moderate. Thus, Humana and any other insurance company that takes taxpayer funds is running a very real risk to its reputation, and harming a company's reputation is, obviously, not generally in the interest of shareholders. A good example is what happened to Ford and GM's reputations after GM took bailout money and Ford did not. More than a few people bought Ford over GM cars in the aftermath because Ford did not take the bailout. Humana could well have a better reputation among consumers if its CEO agreed to not take taxpayer money.
Part of that statement is true: Companies would rather have good reputations than bad. But the entire concept of the exchanges is based on insurers taking taxpayer money, in the form of federal subsidies that make premiums affordable. If those subsidies are kosher (and remember, they're a conservative idea), what's the problem with also accepting money through the risk corridors and similar programs? Why should Humana fear a public backlash for accepting that money?
Here's what Hogberg had to say:
One difference is that premium subsidies are ostensibly to help people buy insurance. Risk corridor money primarily helps insurers' bottom lines. And then the question is whether the public cares about such distinctions when it hears about the risk corridors. I doubt that most folks do; they just see "insurance company bailout."
The idea that subsidies help people buy insurance, while risk corridor money helps insurers' bottom lines, is sheer sophistry. The risk corridors aren't some sort of giveaway; they're designed to keep insurers in the exchanges and keep premiums down, so they're just as focused on making insurance available as the subsidies.
The second part of Hogberg's statement, though, is exactly right: When you dangle an incendiary phrase such as "insurance company bailout" in front of a public that doesn't much understand the law to begin with, the details are much less likely to matter. Now, what kind of organization would try to cloud the public's judgment like that?
It's hard to see this type of thing working; the American public already holds insurance companies in low regard, and accepting federal money won't incur the public's wrath nearly as much as raising premiums. Strategies such as this convey a sense of desperation; isn't there anything better to object to in this law?
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