Obamacare

Is Obamacare's Insurer Bailout Legal? GOP Legislators Want to Know

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Whitehouse.gov

Last month, buried in a 435-page regulatory filing from the Centers for Medicaid and Medicaid Services (CMS), the Obama administration attempted to reassure the health insurance industry that, if necessary, federal officials would find money to make payments for Obamacare's "risk corridors"—the temporary shared-risk financing system built into the health law that has been dubbed a bailout of the health insurance industry.

The regulatory filing reiterated the administration's position that the program would likely be revenue neutral. But in the event that it's not, it seemed designed to suggest that insurers shouldn't worry.

"In the unlikely event of a shortfall for the 2015 program year," the regulation said, "HHS [Health and Human Services] recognizes that the 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."

On the surface, that seems pretty clear: If the risk corridors program, a symmetrical arrangement which requires the administration to cover half of insurer losses if claims expenses go beyond 103 percent of expected costs and insurers to pay in if costs come in at 97 percent of expectations, ends up costing the administration money, it will find a way to pay.

The complication comes from the final phrase: "subject to the availability of appropriations."

That could be a problem. Because according to a January memo from the Congressional Research Service (CRS), there do not appear to be appropriations available to make the payments. Although the health law does direct the Secretary of Health and Human Services to make risk corridor payments, the CRS memo explains that the legislation "does not specify a source from which those payments are to be made."

That's a problem. According to the Government Accountability Office (GAO), it's not enough for a statute merely to direct payment. It also must designate which funds are to be used. Both elements must be present in order for a payment to be lawful.

So where will the money come from? How will the administration shift the money around if they don't have the authority to tap any particular funds? That's what Rep. Fred Upton (R-Mich.) of the House Energy and Commerce Committee and Sen. Jeff Sessions (R-Ala.) of the Senate Budget Committee want to know.

The two GOP legislators have written a letter to newly installed HHS Secretary Sylvia Mathews Burwell asking for an explanation of just how the administration believes it can justify the creative financing it has promised, should such spending become necessary.

Does Burwell agree with the legal analysis offered by CRS and GAO? Does HHS have a legal analysis of its own? Given the legal analysis stacked against the administration, these seem like basic, reasonable questions that should be answered and explained.

In confirmation hearings before being confirmed as HHS Secretary, Burwell suggested that she would be more open, transparent, and responsive to Congress than her predecessor, Kathleen Sebelius, with regards to the health law. That's a low bar. How Burwell responds will tell us something about whether she's clearing it, and if so, by how much.

Read the complete Upton/Sessions letter below.

HHS Risk Corridors by PeterSuderman

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  1. If it WAS illegal it’s not like anything would happen.

  2. “Is Obamacare’s Insurer Bailout Legal? […]”

    No, and since the GOP isn’t going to do a damn thing about it, why do they care?
    Is it for conversation over cocktails this evening?

    1. Don’t believe everything you read on this subject. Both sides are monumentally stupid here. Like almost everywhere else.

  3. Is Obamacare’s Insurer Bailout Legal? GOP Legislators Want to Know if They Can Spin It into a Few More Points at the Polls While Simultaneously Preserving the Power for Their Eventual Presidency

  4. See? Someone did read the bill before it was passed. The insurance industry signed off on Obamacare not out of total ignorance.

    1. Duh, yeah. The insurers demanded a universal mandate to offset the losses of a pre-existing mandate — after Obama was elected but before he took office — for reasons which SHOULD be self-evident.

      In opposing the law, it was libertarians and fiscal conservatives operating on total ignorance …. of how insurance works. It was painful to watch. Do we all recall the totally stupid RyanCare vouchers?

  5. OT:

    Here’s what happens after the government takes all of your guns:

    Jackpot!

    1. It’s starting to look like we are entering a Peak Plunder Period.

      Hoist the Black Flag and begin slitting thoats.

    2. I called this with 401ks, but the principle is the same. There’s all that money just…sitting there. The parasites are having a harder and harder time resisting just fucking taking it.

  6. Dos anyone, anyone at all, really think legality has a modicum of influence on whatever Obama chooses to do?

    He is transcendent! He is The One! Now go away, you mortals.

    1. The One laughs at your petty concerns about legality.

  7. Does Burwell agree with the legal analysis offered by CRS and GAO? Does HHS have a legal analysis of its own? Given the legal analysis stacked against the administration, these seem like basic, reasonable questions that should be answered and explained.

    When the President does it, it’s not illegal. Now back off, peasants.

  8. Easy. The money will come from all of the fines collected from the people that did not get coverage.

  9. I’ll go out on a limb here and state that it doesn’t matter. Congress, despite its Constitutional responsibilities, will do NOTHING. And the GOP, despite its grandstanding ever since Obamacare passed, will NEVER, EVER, EVER (and I do mean NEVER) repeal it.

    1. Fixing a problem means that problem is not useful as a ‘reason’ to give voters to elect you. It applies to Reps as much as Dems.

    2. The GOP said they were going to repeal and replace it. Because when you remove cancer you’ve got to replace it with something.

      1. They’ve never had a credible alternative, and Ryan’s Medicare Vouchers prove they know nothing at all about free markets.

  10. Is Suderman’s Abandonment of Alt-text legal? Commenters want to know!

  11. Would it matter if it was illegal?

    Obama’s pretty much taken to ordering all sorts of illegal changes to the law, and it’s not like anyone has bothered to stop him.

    1. How would Republicans go about stopping Obama from doing whatever he wants? Ask the Department of Holder to arrest him?

      Seriously, how?

  12. When the president does it, that means it’s not illegal.
    Nixon

    Nixon and Obama seem to share a lot of the same views.

    The president can do whatever the fuck he wants. Who is going to stop him? Sure he can be impeached, but that’s rather rare, far to rare in my humble opinion.

  13. Hmm, Suderman gets it wrong again, by not understanding the law.

    Risk corridors — aka “reinsurance” — smooth out high and/or unknown risks. Typically, smaller plans may not have enough people to SAFELY share the risk of cancer, so they “reinsure” (spread their risk among more people in a multi-plan pool).

    Here, Obamacare insurers base premiums assuming “average” exposure to the pre-existing risk. But some insurers will have “excess profits” from few pre-existing enrollments. Others will have losses. Nobody knows until after the fact, but premiums are before the fact.

    Obamacare’s reinsurance collects funds from below-average risk insurers, to offset losses by above-average risk insurers. In theory, it was to balance. But it collapses (maybe) because EVERY plan may have above-average sick people, so who pays for the losses?

    What Suderman proposes, along with too many others, is that insurance companies be punished because they allowed themselves to be subjected to … the legal mandates. So let’s punish the victims!

    The cited complaint letter is also kinda daffy. It claims the law never says the income from risk corridors can pay the expenses of risk corridors, which denies that risk corridors exist! I am not making this up. (I don’t defend the law, merely explain it)

    If taxpayers face a risk, opponents of Obamacare share the blame, because they screwed up damn near everything.

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