The Magazine

The Slush Fund

How Obamacare pays off insurers.

May 12, 2014, Vol. 19, No. 33 • By JAY COST and JEFFREY H. ANDERSON
Widget tooltip
Audio version Single Page Print Larger Text Smaller Text Alerts

In its most recent rule, the administration sidestepped this thorny issue. It promised to ensure that the program will be budget-neutral but did not say how this will be achieved. Instead, HHS now plans to prorate risk corridor payments for 2014 and 2015 if the money coming in turns out to be less than what is supposed to go out. It further promises that, as the program generates extra revenue in 2015 or 2016, insurers will be paid back anything they lost under proration. But what happens if the
program is still in the red in 2016? HHS promises to “establish in future guidance or rulemaking how we will calculate risk corridors payments.” That is, they’ll figure it out when they have to, and taxpayers better hold tight to their wallets.

Again, the objection here is not so much to the Three Rs in theory. The objection is to what they have become in practice—a slush fund for the administration. The president has made a series of legally dubious changes to the law for political reasons. He has adjusted the Three Rs to pacify and protect his insurance allies, at a projected cost of $8 billion to taxpayers. What’s to prevent him from making more changes to the law and using the open-ended nature of the risk corridor program to funnel even more money to insurers? The only thing that will stop him is his own calculation about what he can get away with politically. 

In response to these concerns, Senator Marco Rubio (R-Fla.) has introduced in the Senate and Rep. Leonard Lance (R-N.J.) has introduced in the House short, simple bills requiring Obamacare’s risk corridor program to be budget-neutral, drying up the slush fund. Every Democrat—let alone every Republican—should be willing to codify a promise the administration has already made.

All of this is disconcerting. Obama-care, as passed by Congress and signed by the president, was not only horribly constructed from a policy perspective; it was badly constructed politically. Yet, smart or dumb, it is the law. 

Now the president has unilaterally rewritten parts of the law, circumventing Congress. All of his extralegal alterations have followed a pattern: They have either (a) made it easier for Obamacare’s “winners” to sign up, or (b) delayed the point at which Obamacare’s “losers” will realize they’ve been hurt. And when his insurance allies stood to lose through his lawless actions, the president shuffled an estimated $8 billion their way to ensure their loyalty. The Three Rs made that possible.

The American separation of powers was devised to prevent such shenanigans. King George III had ignored the colonies’ legislatures and done what he pleased. So the Constitution tethered the president to the laws that Congress has passed and a president has signed. In his efforts to make Obamacare more salable, President Obama has undermined that document’s sacred division of power. His estimated $8 billion payoff to insurance companies is one sordid chapter in a longer and troubling story. 

Jay Cost is a staff writer at The Weekly Standard. Jeffrey H. Anderson is executive director of the 2017 Project, which is working to advance a conservative reform agenda.

Recent Blog Posts