Insurance Co. Bailout Coming-----Unless Congress Says No To Back-Door Obamacare Raid On Treasury

By Eric Boehm

Insurance companies made out well with passage of the Affordable Care Act, getting a major expansion in the size of the market thanks to the law’s mandate that most Americans buy health insurance, either through their job or through one of the new exchanges.

On top of that were provisions in the Affordable Care Act, better known as Obamacare, allowing the government to bail out any insurer that finds itself in the red before 2016.

But taxpayers may get a break from having to directly subsidize insurers for losses if Congress doesn’t go along with funding the “risk corridors” program that bails out insurers over the next two years if they end up losing money.

“Language appropriating funds for ‘other responsibilities of the Centers for Medicare and Medicaid Services’ would need to be included in the (Center for Medicaid and Medicare Services’ Program Management) appropriation for FY 2015 in order for it to be available for payments to qualified health plans,” wrote Susan A. Poling, general counsel for the Government Accountability Office, in a memo to members of Congress on September 30.

In plain language, Poling concluded Congress has to specifically appropriate funds for the risk corridor program starting in 2015 as part of the annual budget bill for CMS. Given Republican control of both the House and the Senate, such an appropriation is likely to face serious obstacles.

"The law requires appropriations for risk-corridor payments. As a result of the election, Republican majorities in both chambers can ensure that no further appropriations are made for risk corridors" concluded John R. Graham, a senior fellow with the National Center for Policy Analysis, who has closely followed the debate over the risk corridor program.

Debate over funding

The risk corridors program has been the subject of behind-the-scenes debate over the past year, with Congress seeking to find out whether the risk corridor program has to be cost-neutral and if not, whether it requires a congressional appropriation to fund payments to insurance companies.

The risk corridor program allows the government to take money from insurance companies that make “excessive” profits and pay insurance companies that fall into the red. But it is entirely possible that there will be no excessive profits, or at least that there will not be enough revenue from taking away excessive profits to cover the losses of unprofitable insurers.

Although the Obama administration originally claimed that the risk corridors would be self-funding and not require taxpayer dollars, there’s nothing in the law requiring this. Instead it seems the administration simply assumed there would be enough excess profits to fund the program’s payments to insurers with excess losses.

The Government Accountability Office said the dollars to fill any gap between revenue and costs for the risk corridor program would have to come from congressional appropriations. “Agencies may incur obligations and make expenditures only as permitted by an appropriation,” wrote Poling in the GAO analysis.

Rulemaking expands potential taxpayer losses

Taxpayers may be on the hook for even greater losses than the law originally envisioned, according to Graham. During the spring, the Obama administration finalized a rulemaking that widened the range of profit losses that could be recouped through the program.

The rule moves towards “abandoning the fantasy of budget neutrality,” when it comes to the risk corridors, wrote Graham earlier this year in a blog post. Following the election, Graham noted the Obama administration does not have an estimate of how much the risk corridors will cost taxpayers, adding “It is important that Congress stop this unlimited taxpayer liability.”

In addition to not appropriating funds for the risk corridor program, Congress can repeal it outright. Representative Leonard Lance (R – NJ) has submitted legislation, H.R. 5175, that would do just that.

“Does the law allow the Administration to cover insurance company loses and are taxpayers going to have to foot the bill?” asked Representative Lance at a July 28 hearing discussing the issue. “Taxpayers need to be protected from more bailouts and we need to ensure that the Administration is following the letter of the law.”

http://news.heartland.org/newspaper-article/2014/11/10/congress-must-approve-insurance-company-bailouts

 

Eric Boehm ([email protected]) writes for Watchdog.org, where an earlier version of this article first appeared. Reprinted with permission.

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