Obamacare: What's Next, and Next, and Next, and Next?

From Ace:

As Jake Tapper reports, documents have leaked showing that Obama's Obamacare "War Room" is panicked about What Comes Next.

Officials expressed concern that the next shoe to drop in the evolving story about the Affordable Care Act would be disappointment from consumers once they are able to get on the troubled HealthCare.gov website – disappointment because of sticker shock and limited choice, according to a new document obtained by CNN. 

“Mike described a general concern of PM (Project Management): getting to the point where the website is functioning properly and individuals begin to select plans; the media attention will follow individuals to plan selection and their ultimate choices; and, in some cases, there will be fewer options than would be desired to promote consumer choice and an ideal shopping experience. 

Additionally, in some cases there will be relatively high cost plans,” say the notes from the Obama administration’s Obamacare 'War Room' from one week ago.

AllahPundit games this out and figures it's going to take a lot of Distractions to draw the eyes away from the months and months of trainwreckage on the horizon.

The point, though, is that horror stories about people losing their doctors en masse are still to come and the White House is preparing for them. Which makes me wonder: 

Given all the political agony that’s in store for red-state Democrats up for reelection next year, how much longer can they afford to stand by the law? 

Even if the website’s fixed tomorrow, they’re staring at a parade of horribles well into 2014. 

Rate shock is the story now; the next story will be whether O-Care can possibly hit its enrollment targets in order to make the program sustainable. (This assumes that Healthcare.gov will begin operating smoothly soon. If it doesn’t, the next story will be all about Democratic panic and Obama’s bad options in minimizing the damage from a busted enrollment drive.) 

The next story after that will be people outraged at how their provider networks have shrunk. After that comes the March 31, 2014 deadline for enrollment; will the administration reach its target on that or will the deadline be extended, raising the risk of an adverse selection problem for insurers? 

And then, as a cherry on top, after a long summer of the GOP showcasing ObamaCare nightmare stories, insurers will release the 2015 rates next October and there’ll be a new flood of small-business employees agonizing publicly about how high the premiums are on their new exchange-bought plans. 

It’s nothing but sh*t sandwiches for Senate Dems until next November. How long before they lose their appetites?

You guys know what happens when Obamacare fails to sign up enough young, healthy Taxable Units and the insurance companies incur major losses? Have you heard?

What happens is, get this, a huge federal bailout already provided for in the law itself:

[T]here are deep-in-the-weeds protections baked into the Affordable Care Act: risk adjustment, reinsurance, and risk corridors… … 

[R]isk corridors will play the biggest role if the individual mandate does get delayed. Their entire purpose is to stabilize premiums during the first three years of Obamacare, when it’s especially difficult for insurers to price plans. 

Here’s how it works: exchange plans (QHPs) projected how much their risk pool would cost overall in 2014, their “target” cost. If they’ve significantly miscalculated—or, say, if a mandate delay causes adverse selection that they couldn’t have predicted—HHS will take action. 

As McIntyre describes in more detail, the “action” involves a 50 percent bailout for costs that exceed 103% of the insurers’ cost target, and an 80% bailout for costs that exceed 108% of target. 

If a plan undershoots its cost target, it has to pay HHS according to a similar formula for costs below 97 percent and 92 percent. Section 1342 of the ACA states that the “target” amount is the total of all premiums paid minus administrative costs — that is, it’s the break-even point for the plan. 

Ideally, the plans that undershoot costs are supposed to pay for the ones that overshoot. But there is no such limit contained within the law, so if an industry-wide problem develops, it has not been been budgeted for. 

As McIntyre puts it: 

Importantly, it doesn’t need to be budget neutral; if the math demands it, the government can pay out more than it collects through the program. This could be expensive—the CBO scored the health law as though risk corridors were budget neutral—but it could also be offset by foregone subsidies. 

This helps explain why Obamacare is attractive enough for insurers to take the risk. They won’t recoup everything if it goes badly, but even if a plan’s costs are twice as great as the premiums collected, its losses are limited by this provision alone to 23.9 percent of premiums collected through 2016. (There are further provisions designed to mitigate losses by having plans with lower costs share the risk with plans that have higher costs, but none of that depends on the taxpayer.) 

What if the mandate is not delayed, but the current enrollment “glitches” cause an adverse selection problem anyway (i.e., the most desperate uninsured are more likely to have the persistence to enroll and enrollment of healthy people just never catches up)? 

An industry-wide bailout might be needed anyway. Either way, next fall, if higher premiums are announced for exchange plans in 2015 and it becomes clear around the same time that a bailout of insurers is on its way, it isn’t going to go over well with the public.