Bailout Could Backfire on Insurers

As seems to be customary for a Friday, we have a lot of news out on the Patient Protection and Affordable Care Act. The Barack Obama administration is firing CGI Group Inc., the company with one of the largest contracts for work on the troubled health-care exchanges. This was probably inevitable, but coming at this point, it suggests one of two things: that the exchanges are now stable enough that the administration can afford to claim a scalp, or that CGI's work is so bad that it's better off being fired even if the exchanges are none too stable. The first option seems more likely to me, but the second is certainly not out of the question.

More interesting is what's going on with the insurers. They are simultaneously asking the administration for more money and trying to stave off Republican efforts to curtail the backdoor bailouts they're already getting. This has an understandable business logic, and even a hint of fairness: The administration changed the rules on them midstream, in a way that seems likely to impose heavy losses. It's understandable that they would like the administration to make them whole. I take this post by insurance industry consultant Bob Laszewski to reflect the insurer perspective on what should happen -- and what they think will: