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Follow the Obamacare Money

I am constantly amazed at the creativity of investment funds. I didn’t realize until today that there are mutual funds that allow investors to bet for or against the Affordable Care Act.

So what does Wall Street think about Obamacare? According to Bloomberg Businessweek “investors have bet 45 times more money on Obamacare’s success than on its failure.” ”

Plus, the fund that bets on Obamacare is up 46.9% in the last year, while the fund that bets against is up only 13.8% (underperforming the S&P 500, which is up 22.8% in the same time frame).

Unsurprisingly, it was the Republican effort to kill Obamacare after it was enacted that hurt health care investment the most. Once the Supreme Court ruled that the law was constitutional, investment in health-oriented companies soared. Funds focused on health care saw their assets more than double from $7 billion to $16 billion. According to venture capital firm Venrock:

Investors can’t imagine a scenario where the changes the Affordable Care Act started will be repealed and taken away. There’s a ton of money flowing into things that help health-care [companies] take advantage of the insurance market changes, the coverage expansion, the payment model changes, and the data liberation that are derivative of the law.

And yet, the Republicans are still trying to sabotage Obamacare, opposing Medicaid expansion, trying to discourage young people from signing up, and even a recent proposal from Marco Rubio that would abolish “risk corridors” that limit the risk to health insurers. Rubio claims that it is a bailout. What’s hypocritical about this is that risk corridors are a Republican idea that were part of Dubya’s Medicare prescription drug law, and which actually saved taxpayers $7 billion. And the risk corridors in Obamacare are projected to save the taxpayers even more than that.



  1. Hassan wrote:

    Marco Rubio and many new generation of Republicans (Rand Paul etc) were staunch anti bailout of anything. I think I mentioned it once before, just because your party has done it in past, criticizing it right now, does not make it hypocritical.

    How does risk corridor save taxpayers money? It just saves insurance companies from failing. Also the current Obamacare is so much extreme mix of taxpayer money, government regulations, the private insurance companies increasingly seem redundant. Lets just kick them out of this mix.

    Sunday, February 23, 2014 at 8:02 am | Permalink
  2. Iron Knee wrote:

    Whoa! Just because you criticize someone for doing something that you yourself have done (repeatedly) doesn’t make you hypocritical?

    Risk corridors reduce risk, but they also reduce the upside (if the insurance companies charge too much for premiums, they must pay back the excess). Bailouts only reduce risk (“I’ll bail you out if you fail, but if your risky gamble pays off you get to keep all the money”). Risk corridors also increase health premium price stability, which makes health insurance more affordable. And Obamacare only has them for 3 years, to help with the transition.

    What makes Rubio hypocritical is that he is doing this just to sabotage Obamacare. He would play politics with people’s health in order to make Obama and the Democrats look bad. That’s worse than hypocritical.

    Sunday, February 23, 2014 at 1:00 pm | Permalink
  3. David Freeman wrote:

    The purpose of the risk corridor is to reduce risk and uncertainty for the insurance companies. The risk corridor puts limits on both the possible loss and the possible gain for the companies. Without the loss limit, insurance companies would charge very high fees to reduce their risk. The risk corridor saves the insured because of lower policy premiums due to reduced risk. The risk corridor saves tax payers because the government subsidizes many poorer families and lower premiums reduce the subsidy. If insurance company profits are outside the upper corridor amount, then there are premium refunds.

    This is nothing like a bailout.

    Sunday, February 23, 2014 at 1:08 pm | Permalink
  4. Iron Knee wrote:

    Exactly, and calling it a bailout is just a political ploy to make it sound bad (so Republicans can attack Obama).

    Governments use risk corridors in other ways, notably to reduce the risk of flood insurance. Otherwise, insurance companies would have to charge much more for flood insurance because of the risk that widespread flooding would wipe them out. It is just another way to spread risk, which is basically what insurance does in the first place.

    I like risk corridors because it makes it possible for smaller companies to compete, and thus increases competition. Otherwise, only huge companies would have a large enough risk pool.

    And Hassan, while many of us would like a single payer system, Clinton tried to pass that and failed. What makes you think it has a better chance of passing today?

    Sunday, February 23, 2014 at 2:17 pm | Permalink
  5. Hassan wrote:

    Hmm, did Mark Rubio, Ted Cruz, and Rand Paul ever favor government bailouts and risk corridors for medicare thing? I am still not understanding how being against something make you hypocritical?

    I think insurance companies have to be phased out, and for that Obamacare is doing good job, by increasing medicaid and government subsidies etc. Getting rid of insurance companies will reduce the cost (as profit portion will become obsolete)

    Sunday, February 23, 2014 at 2:44 pm | Permalink
  6. Bob H wrote:

    Dr Rubio doesn’t know his arse from first base!!

    Sunday, February 23, 2014 at 4:19 pm | Permalink
  7. Michael wrote:

    I think Hassan’s point is that, while other Republicans voted for bailouts like TARP in the past, Rubio, Cruz, Paul, and their ilk did not. They couldn’t have, since they weren’t in office when the bailouts came to a vote. Given that they have done things that have irked their own party leaders, it is possible that they would have voted against the bailouts; we cannot know for sure. Thus, those particular individuals cannot be called hypocrites.

    Their party? Certainly. Take the “fiscal conservative” Paul Ryan, for instance, who did vote for the bailouts, No Child Left Behind, the Bush Medicare expansion, etc., etc. He was clearly for big government before he was against it.

    Monday, February 24, 2014 at 9:12 pm | Permalink
  8. Iron Knee wrote:

    Michael, I understood that, but I still think that this move is hypocritical. Why? Because “risk corridors” is something our government does all the time with things like flood insurance (and they aren’t screaming about that). Because a risk corridor is NOT a bailout, so they are lying. Because they have said as much that they are trying to sabotage Obamacare by any means possible (including lying repeatedly — remember death panels?), so they don’t actually care about bailouts, and even worse they are just using it as a craven excuse to make themselves look like they are opposing Obamacare (even though they well know that this has no chance of passing). And finally, think of how much damage this would do to insurance companies if suddenly the prices they offered people for health insurance were not supportable because the government changed their mind and repealed risk corridors. This is not changing your mind at the last minute, this is retroactively changing the entire game and screwing everyone, just for political gain.

    But I will agree to not call them hypocrites (on this one issue) if I can instead call them “assholes”. Fair?

    Tuesday, February 25, 2014 at 12:11 pm | Permalink
  9. Michael wrote:

    Sounds perfectly fair to me. I’d also add craven, moronic, and liar to their labels, but that’s just me.

    Tuesday, February 25, 2014 at 11:15 pm | Permalink