No Obamacare Bailouts for Insurers Without Congressional Approval, Says GAO


By forcing Americans to buy their products, President Obama's signature Affordable Care Act is widely seen as a winning proposition for health insurance companies. Conscripted customers! What more could a well-connected business want? But the law's complex rules require insurers to cover the costs imposed by older and ailing customers with the payments from young and healthy customers. Potentially, a company could end up with a disproportionate ratio of sick customers drawn by the promise of subsidized coverage—drowning the seemingly winning proposition in red ink. If that happens, says the Government Accountability Office (GAO), the administration can't bail out insurers without permission from Congress.

The GAO decision comes in response to a congressional inquiry about the administration's "risk corridors" (officially, the premium stabilization programs) scheme, which would subsidize unprofitable plans by transferring money to them from those actually in the black under Obamacare. The risk corridors plan is a temporary measure intended to entice insurers to offer Obamacare coverage while the program gets on its feet. The assumption is that after 2016 plans will balance out costs and benefits because of those conscripted customers.

But it's not enough for a statute to require that an agency make a payment—the funds have to be legally available. As the GAO decision puts it, "At issue here is whether appropriations are available to the Secretary of HHS to make the payments specified" under the law. The GAO says they're not.

The problem for the administration is that collecting money and disbursing it through government agencies requires budgetary authorization. That authorization can only come from Congress, and must be authorized in each annual budget, year after year.

Language appropriating funds for "other responsibilities of the Centers for Medicare and Medicaid Services" would need to be included in the CMS PM appropriation for FY 2015 in order for it to be available for payments to qualified health plans under section 1342(b)(1). Similarly, language appropriating "such sums as may be collected from authorized user fees" would need to be included in the CMS PM appropriation for FY 2015 in order for any amounts CMS collects in FY 2015 pursuant to section 1342(b)(2) to be available to CMS for making the payments pursuant to section 1342(b)(1)

So, if Congress doesn't go along with the idea of gathering money from profitable health exchange insurers and handing it to unprofitable ones, the risk corridors idea is a non-starter.

Of course, Congress may authorize the payments because it doesn't have the backbone for another fight. That wouldn't be a shock. Or, the administration could ignore the GAO and use executive authority to make yet another unilateral change to the president's health plan. That also wouldn't be a shock.

But, if nothing else, the GAO decision is further evidence of the slapdash crafting of the Affordable Care Act, even when it comes to the legislative duct tape intended to hold it together.

NEXT: Audit the Fed Already!

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  1. Executive Order – by pen and by phone.

    1. collecting money and disbursing it through government agencies requires budgetary authorization. That authorization can only come from Congress,

      In China, they don’t have impediments like that. They have men that can make a plan work. Stupid Constitution, getting in the way of progress again.

  2. It’s cute that the GAO things this administration would actually follow their own laws

    1. “GAO has made their decision; now let them enforce it.”

      1. This may be one of the few places that understand that reference.


      2. “How many divisions does the GAO have?”

      3. “Your credentials, sir!”

  3. “slapdash crafting”

    As I recall, Obama even demanded that Congress pass it months before they finally did after even more slapdashery. The joke at the time was that Obama took more time to pick out a breed of dog for his kids than he expected Congress to take on this country-altering legislation.

  4. So this is sort of an NFL revenue sharing plan, instituted by the government. This is going to be awesome.

    1. The Rail Unification Plan would work just as well for any other industry.

  5. Just think if it does well (through congress or executive order) in the healthcare field our government might get the brilliant idea to use this “appropriation plan” in other business’s it has no business over-seeing.

    1. I can easily see someone making the argument that the authority to make a payment grants the authority to raise the payment funds – the authority to do X implies the authority for whatever actions are “necessary and proper” to accomplish X – but what happens if you extend that same latitude to other agencies?

      For example, the EPA is charged generally with keeping the environment clean and is authorized to issue rules and regulations to that end. Suppose they decide they need more money than Congress has granted them to pursue their mandate, so they enact a scheme of fines and fees and other funding to derive their own independent revenue stream. Is that part of a necessary and proper execution of their mandate?

      (Before you decide that that’s a ridiculous over-reach, keep in mind the story of the federal judge who once decided that the law mandating an adequate education for the children allowed him to order the Kansas City school board to raise taxes and direct the spending in that 2 billion dollar fiasco. It’s hard for me to imagine how much more authority someone can seize from a simple law, but it’s easy to imagine government actions overwhelming my puny imaginative powers.)

  6. That Obama has to seek Congressional approval for bailouts should be good news; the problem is that, since John Boehner is a White House lackey, there’s no reason to think he’ll oppose Obama bailing out the insurance companies any more than Boehner opposed bailing out Wall Street for their bad investments by way of TARP.

    In fact, if Barack Obama opposed bailing out the insurers for some reason? I suspect John Boehner might even fight him on the issue!

    You know how some of us were criticizing the people of Ferguson for voting for Democrats who a) put the policies in place they were demonstrating against and b) were in the pockets of the very public employee unions that were supporting the cops that were beating the shit out of them? So long as John Boehner is the Speaker, we’re kinda like the voters in Ferguson.

    Even if the Republicans take control of the Senate come November, so long as Boehner is the Speaker, Barack Obama will effectively keep control of the House–certainly on issues like bailing out the insurers.

    Anybody who thinks John Boehner is going to use his leverage to force changes in ObamaCare–of his own free will–is just dreaming.

  7. This may end up being one of the wages of the standing rule as it is currently applied. If Obama breaks the law and spends the money, what is the remedy? It would be a crime under the anti-deficiency act but only the AG could prosecute it. We all know that won’t happen. The insurance companies who get the bailout will be benefiting so they won’t have any harm to get standing even if they wanted to sue. And since it only gives money and doesn’t’ take it away, no one else will be able to claim a harm.

    Other than impeachment, there is no remedy for this or any way to stop it.

    1. I could see that happening. But directly going against a GAO ruling would tend to lift the veil on the Obama administration, so to speak.

    2. Well, there’s secession, coup, civil war, etc.

    3. Impeachment is enough. It doesn’t have to start with the President, either.

  8. Too big to fail two: the insurers strike back.


    2 big 2 fail

    Either way its the same shitty cast as the last one.

    1. Yeah and it’s going to be the biggest budget blowout since “Waterworld”.

  9. Congress is for feelings, nothing more than feelings.

    Decisions? Those might hurt one’s re-election chances, so Congress will create an executive-level agency to handle those.

  10. . . . That authorization can only come from Congress. . .

    And this has congress-members *quaking* in their boots. If they were scared to go on record for or against a bombing campaign against BSP’s then they have to be terrified of taking responsibility for a decision that effects actual Americans.

  11. Jerking with the bankruptcy laws is something that can put a big damper on the economy, the discussion that Richard Epstein had on Econtalk about the GM bankruptcy was excellent. Every bond purchase now has to be considered with possible future funny business.

  12. Not a bad plan if I was writing the legislation, Congress refuses to authorize insurance company bailouts, they cease writing policies, new crisis and a clear need for a single payer, totally governmentally administered system. Ultimate goal accomplished!

  13. And this bright idea will, of course, be immune to the Law of Unintended Consequences?

    Dream on.

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