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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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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. 

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