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Emails Show Cozy Government-Insurer Alliance, Expectation of Bailout

8:06 AM, Jul 29, 2014 • By JEFFREY H. ANDERSON
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Publicly, President Obama loves to demonize insurance companies.  But behind the scenes, Big Government and Big Insurance maintain a cozy alliance that the Obama administration actively nourishes, often at taxpayer expense.  Indeed, as emails recently obtained by the House Oversight Committee show, Big Government and Big Insurance have worked together to promote Obamacare.  They’ve also worked together to make sure taxpayers will help bail out insurance companies who lose money selling insurance under Obamacare — that is, unless Republicans stop this from happening.  Moreover, Obama senior advisor Valerie Jarrett is among the prominent White House officials who’ve been in the middle of this collaboration between insurers and the administration — between those driven by the profit motive and those driven by the power motive.

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As is detailed in the Oversight Committee’s report, shortly after the disastrous Obamacare rollout began, White House communications director Tara McGuiness and Chris Jennings, Obama’s deputy assistant for health policy, “traded talking points with numerous insurance company CEOs.”  According to the report, “Ms. McGuiness and Mr. Jennings collaborated closely with Florida Blue Cross and Blue Shield CEO Patrick Geraghty.  After a CBS Evening News appearance on October 11, 2013, Ms. McGuiness emailed Mr. Geraghty, ‘You were great!  I watched.  Thanks for the help.’”

Twelve days later, Geraghty and the respective CEOs of Aetna, Humana, the Health Care Services Corporation, Centene Corp., Wellpoint, Kaiser Permanente, Tufts Health, Health Net, CareFirst, the Blue Cross Blue Shield Association, and America’s Health Insurance Plans (AHIP) all met with Jarrett and Obama chief of staff Denis McDonough at the White House. 

A few days after that, the report reveals, Jennings emailed Geraghty in advance of an appearance on Meet the Press, writing, “Pat: Tara McGuiness will probably reach out to you directly today to give you latest info and suggestions for press prep.  Please advise if you need anything from me.  I may call you later to make sure all is ok.  Thanks so much for all.”  Both McGuiness and Jennings then followed up with specific advice.  After Geraghty’s appearance aired, Jennings emailed him and said, “Pat: You were extraordinary.…We were all impressed.  Thank you so much!  Would like to talk soon….”

Meanwhile, the Obama administration was coming under increasing political pressure — as millions of Americans found out that (contrary to Democratic messaging across the years), if they liked their health plan, that didn’t necessarily mean they could keep their health plan.  After Obama lawlessly empowered himself to un-ban the plans that Obamacare had banned by law, insurers weren’t happy, so the administration responded by paying them off. 

It did so by changing the rules regarding two programs buried in the bowels of Obamacare — its risk-corridor and reinsurance programs.  As Jay Cost and I wrote this spring, the administration changed the rules “to funnel more money to insurers.  Put simply, the administration lowered the threshold at which insurers become eligible for reinsurance money, and it made more generous the formula by which insurers get paid under the risk corridors.”  In the process, Obama effectively turned the risk-corridor program into his own personal slush fund.

Along the way, however — perhaps in response to Senator Marco Rubio’s efforts to highlight that Obamacare’s risk corridors would provide an insurer bailout — the administration declared that the risk-corridor program would be budget-neutral.  In reply, according to the Oversight report, CareFirst Blue Cross Blue Shield CEO Chet Burrell emailed Jarrett and then talked on the phone with her later that same day.  The next day, he emailed her again, attaching a memo that said, “Until very recently, the position of the Administration had been that the law requires the Federal government to fully fund the Risk Corridor payments if amounts paid in by the ‘winners’ turn out to be inadequate — as they likely will.’”  Otherwise, he added, “carriers will have to increase rates substantially (i.e., as much as 20% or more beyond what they would otherwise file) to make sure that premiums adequately reflect expected costs.”  In other words, the administration had a choice:  provide a bailout, or face the unpleasant prospect of having insurers price their products honestly.

AHIP followed suit, writing (in bold) to the administration, “Risk Corridors should be operated without the constraint of budget neutrality.” 

Jarrett wrote back to Burrell, thanking him for his memo and alerting him that “the policy team is aggressively pursuing options.” 

Soon thereafter, the Obama administration abandoned the claim of budget-neutrality, writing in a release from Health and Human Services (HHS), “In the unlikely event of a shortfall for the 2015 program year, HHS recognizes that the [Patient Protection and] Affordable Care Act requires the Secretary to make full payments to issuers.  In that event, HHS will use other sources of funding for the risk corridors payments, subject to the availability of appropriations.” 

But no money has been appropriated for the risk corridors, and — with a GOP-controlled House — none will be.  Given the absence of appropriated money, therefore, the nonpartisan Government Accountability Office (GAO) asked HHS under what authority it would make such payments to insurers.  (As the nonpartisan Congressional Research Service has put it, federal agencies are prohibited “from making payments in the absence of a valid appropriation,” and Obamacare’s risk-corridor section “would not appear to constitute an appropriation.”)  HHS replied to the GAO, “As section 1342 of PPACA requires the Secretary to establish and administer the risk corridors program and requires the Secretary to collect payments from and make payments to certain QHPs [qualified health plans], section 1342 authorizes the collection and payment of user fees to and from the QHPs.”

In reality, however, Section 1342 — which contains fewer than 500 words, none of which is “user,” “fees,” or anything akin to “user fees” — does nothing of the sort.  The administration is merely trying to appropriate money to itself, bypassing Congress.  Otherwise stated, the administration plans to use lawless means to pay off insurers who were hurt by Obama’s lawless refusal to execute Obamacare as written.   

What’s more, the bailout will be big.  The Oversight Committee found that, while insurers expected that only one-sixth of their exchange enrollment would come from people over 55 years of age, fully one-quarter of their actual enrollees fit that category.  Relatedly, the report finds that insurers and insurance co-ops now expect a third more money from the risk-corridor bailout than they did on October 1, 2013.  That bailout, Oversight reports, is now likely to be in the ballpark of $1 billion.  To put that into perspective, the year before Obama took office, the ten largest health insurers’ total profits were only $8 billion — combined. 

The Oversight report adds, “It is impossible to know how much of the increase in the industries’ expectation for the size of the bailouts is the result of a less healthy exchange population than originally anticipated and how much of the increase is from the Administration’s rule changes to make the bailouts more generous; however, both factors are likely significant.”  Moreover, both relate to Obama’s lawless suspension of the portion of the legislation that was causing him the most political fallout.

So, what do Americans think of bailing out insurance companies on their own dime?  Recent polling by McLaughlin & Associates, commissioned by the 2017 Project, asked, “If private insurance companies lose money selling health insurance under Obamacare, should taxpayers help cover their losses?”  By a tally of 81 to 10 percent, respondents rejected that notion.

Representatives Leonard Lance and Bill Cassidy have introduced a bill to repeal Obamacare’s insurer bailout.  Passing it would be a win for those opposed to Obamacare, cronyism, and corporate welfare.  It would also be a win for those supportive of Main Street Americans, the rule of law, and repeal.

If the House does indeed pass such legislation, one thing seems certain — senior White House officials will convene with their insurance allies to decide their next move.

Jeffrey H. Anderson is executive director of the 2017 Project, which is working to advance a conservative reform agenda, including a winning alternative to Obamacare.

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