This fall, voters will get another chance to register their opinion on Obamacare. President Obama’s signature legislation is causing health costs to spike, federal spending to soar, doctors to leave their profession, millions of Americans to lose their health plans, and millions more to be coerced into buying overpriced insurance against their will. For those who care about quality and affordability in health care, fiscal solvency, the separation of powers, liberty, or economic prosperity—which is to say pretty much everyone—Obamacare is a disaster, and it must be repealed and replaced with a well-conceived conservative alternative.
Yet, despite having broken with more than 200 years of precedent in requiring all Americans to buy a product from a private company—namely, Obamacare-compliant health insurance—the Democrats who passed Obamacare are accusing Republicans of being in the pocket of health insurance companies. They accuse Republicans of wanting “to put insurance companies back in charge of Americans’ health care.” Meanwhile, voters would like the party to take a clear stand against cronyism, which benefits well-connected operatives in Washington at the expense of citizens in the heartland.
Well, there’s a way for congressional Republicans to go after Obamacare, cronyism, and the Democrats’ assertion that the GOP is in league with health insurers, all at once: by repealing Obamacare’s risk-corridor bailout. And after overcoming some internal resistance from don’t-rock-the-corporate-boat Beltway Republicans, it looks as if the House GOP is going to move in this direction. If they do—and if they were also to refuse to reauthorize the Export-Import Bank and were to move to reverse President Obama’s failed amnesty policies—Republicans could legitimately make the case this fall that they stand with Main Street America.
Obamacare’s risk-corridor program is a way of shifting risk from insurance companies to taxpayers—of putting the latter on the hook if the former lose money. The risk corridors’ existence incentivizes insurers to lowball their prices, since they know taxpayers will help cover their losses. It’s bad policy, and it’s unpopular. 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?” Only 10 percent of respondents said yes; 81 percent said no. Yet, absent congressional action, that is exactly what’s poised to happen.
In response to recent inquiries by the House Oversight Committee, 12 insurance companies said they expect to be taking money out of the risk corridors this year, 1 expects to be paying in, and 2 expect it to be a wash. In all, health insurers expect to take nearly $1 billion more out of the program this year than they pay in—at taxpayer expense.
If that weren’t bad enough, President Obama has converted the risk corridors into a slush fund, which he has used to help cover up his lawless refusal to execute Obamacare as written. When, amidst a public outcry, Obama unilaterally declared that some Americans whose insurance policies had been banned by Obamacare could temporarily keep those policies after all, insurers weren’t happy. They had been planning on those people—most of whom are generally healthy—being forced into the exchanges. When insurers complained, Obama responded by changing the risk corridor rules to funnel more money their way. This helped buy the insurers’ silence in the face of the president’s lawlessness.
Hans Leida, an actuary for the independent consulting firm Milliman, has explained that the administration’s
transitional policy for canceled plans allowed certain individual and small group plans that did not comply with the ACA [Obamacare] to be renewed for one additional year. This change, announced long after health insurers filed their premium rates for 2014, could result in a less healthy population in the ACA-compliant market, since healthier individuals may be more likely to retain their noncompliant plans. If this occurs, there is an increased risk that the filed premium rates could be inadequate to cover the higher claim costs. To mitigate this concern, the government proposed changes to certain rules for 2014—namely, the federal reinsurance program, the risk corridor program, and the medical loss ratio (MLR) requirement.
Seth Chandler, a University of Houston law professor with a background in insurance law, is blunter, writing that Obama’s gambit is “an extremely sneaky way of sending money to the insurance industry.”
In addition to all of this, Obama has no lawful authority to pay insurers through the risk-corridor program, even in the very unlikely event that payments don’t exceed receipts. Any payments would require an appropriation, and Congress hasn’t appropriated any money for the risk corridors. Yet the Obama administration is now saying the money for such payments can be understood as “user fees,” which—the administration says—“section 1342 [of Obamacare] authorizes the collection and payment of.” In truth, section 1342 contains fewer than 500 words, none of which is “user,” “fees,” or anything akin to “user fees.”
The nonpartisan Congressional Research Service notes that federal agencies are prohibited “from making payments in the absence of a valid appropriation,” and that Obamacare’s risk-corridor section “would not appear to constitute an appropriation.” It adds that agencies “may not create a revolving fund absent specific authorizing legislation,” and “there does not appear to be sufficient statutory language to create a revolving fund.”
So, in addition to providing a taxpayer bailout for insurers, the risk-corridor program has become a vehicle for presidential lawlessness.
Repealing the risk corridors is a way of putting the issues of Obamacare, cronyism, and the rule of law front and center this fall. The House, which now seems ready to move, should do so expeditiously. Bill Cassidy (R-La.) and Leonard Lance (R-N.J.) have championed legislation to repeal the risk corridors, with the active support of Energy and Commerce Committee chairman Fred Upton. If the House passes such legislation by early September, Democrats in the Senate and the White House will have to defend a program that’s bad policy and bad politics: an unholy alliance between Big Government and Big Insurance that prospers at the expense of taxpayers—and voters.