Friday, August 14, 2015

It's Not a Risk When Using Other People's Money

Obamacare's Transitional Reinsurance Program screwed you and helped pad insurance company pockets. I know it's hard to believe that a government program that promised to hammer insurance companies would actually do the exact opposite. But. It. Does.

First, a little background. The Transitional Reinsurance Program is one of three mechanisms in Obamacare created to protect insurance companies from the risks associated with entering into the new marketplaces. This temporary program was designed to help insurers recoup large claims. The goal was for these funds to pay 80% of a high claimant in excess of $45,000 up to $250,000. In other words, the government had you pay to fund insurance claims that insurance companies normally would have paid - but only for those who purchased individual insurance plans through qualified health plans.

In order to receive reinsurance funds insurance companies had to offer Obamacare compliant plans. The funds they receive can only be used to fund claims for the people who enrolled in these plans. According to, they estimated that in 2014 there were approximately 16,347,250 people (on and off exchange) that had purchased individual qualified health plans.

Even though only 16 million people were in the eligible risk pool, funding for this program came from every single person who has private insurance. In 2014 the fee for each person was $63. CMS reported that they received a total of $8.7 billion into this program. Based on these figures there were 138,095,238 people who paid the fee.

In the June 30th CMS summary report we learned that the government has paid out $7.9 billion to insurance companies. Since reinsurance contributions exceeded the requests for reinsurance payments CMS decided to increase the coinsurance rate to 100 percent.

For those keeping score allow me to recap:
  1. 138,095,238 people paid a total of $8,700,000,000 to a reinsurance fund.
  2. Only 16,347,250 people were in the risk pool that this money was set aside to fund claims.
  3. The money in this fund was supposed to reimburse insurance companies 80% of the large claims.
  4. Instead the government paid the insurance companies 100% of the large claims.
  5. The total paid out was $7,900,000,000.
So the government collected more money from you than they needed, gave more money to insurance companies than the original agreement, and kept $800 million of your money for insurance companies in the future. Yet for 91% of those who paid in, it didn't help whatsoever.

Once again we have another Obamacare success!
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