Background: In an effort to win the support of health insurance companies during the debate over Obamacare in 2009, three health insurer bailout provisions were written into the bill to compensate health insurance companies for insuring high-cost consumers in the Obamacare exchanges. These three bailout provisions include risk corridors, reinsurance, and cost-sharing subsidies, that combined, could cost taxpayers $170 billion over the next decade. The risk corridor and reinsurance provisions expire in 2016.
Risk Corridors: Designed to minimize large insurer losses and large insurer profits during the first three years of the Obamacare exchanges, the risk corridor program redistributes profit made by successful insurance companies to those who suffer heavy losses. The Obama administration claimed the risk corridor program would be budget-neutral, meaning total profits on the exchanges would equal total loses, but this turned out to be far from the truth. Due to a lack of young and healthy consumers signing up for Obamacare, insurers operating on the exchanges lost a net total of $2.5 billion in 2014 alone.
In response, the Obama administration tried to move ahead with an insurer bailout until Congress included a provision in the 2015 omnibus bill preventing the Center for Medicare and Medicaid Services (CMS) from doing so. The administration is now attempting to go around Congress using Judgment Funds from the U.S. Treasury to bail out insurance companies with taxpayer dollars. Congress should pass legislation prohibiting the use of Judgement Funds or any other funds for the purpose of bailing out insurance companies.
Reinsurance: The reinsurance program is the second insurer bailout provision under Obamacare also set to expire at the end of this year. As written, the reinsurance provision requires the U.S. Department of Health and Human Services (HHS) to collect, from 2014-16, $25 billion in “assessments” or taxes on employer-provided health-insurance plans and 1.) reimburse the U.S. Treasury, i.e. taxpayers $5 billion for operating costs and then 2.) bail out health insurance companies.
According to the law, insurance companies are supposed to receive $10 billion for costs sustained in 2014, $6 billion for 2015, and $4 billion for 2016, while taxpayers are supposed to receive $2 billion for 2014, $2 billion for 2015, and $1 billion for 2016. But instead of following the law, HHS is illegally prioritized health insurance companies over taxpayers. By the end of the year, health insurance companies will receive $15.7 billion in bailouts while taxpayers will only receive $500 million of the $4 billion they are owed. The taxes on employer-provided health insurance should be repealed along with the rest of Obamacare, but so long as they are current law, the resulting revenue should not be used to bail out insurance companies.
In an effort to stop the HHS from continuing to break the law, Senator Ben Sasse (R-NE) and Representative Mark Walker (R-NC) introduced the Taxpayers Before Insurers Act (S. 2803 and H.R. 5904). If passed, this bill would “penalize HHS for illegally prioritizing big insurance companies ahead of taxpayers through the Affordable Care Act’s reinsurance program” by cutting “50 percent of HHS’s general department management fund unless the Secretary of HHS pays the full amount taxpayers are owed.
Cost-sharing Subsidies: The third bailout provision involves cost-sharing subsidies (lower deductibles and co-payments) for health insurance plans bought by households with incomes under 250 percent of the federal poverty line. While Obamacare does attempt to create cost-sharing subsidies, the bill does not include language actually funding the subsidies. In response, the Obama administration has gone ahead and payed for the subsidies using taxpayer dollars to the tune of nearly $14 billion.
In response, Congress sued the Obama administration in November of 2014 in U.S. House of Representatives v. Burwell. The House argued that the White House violated its Constitutional authority by spending money not authorized by Congress. On May 12th of this year, federal district court Judge Rosemary Collyer ruled in favor of the House, but the White House is currently appealing the decision to the D.C. Circuit Court.
Solution: Obamacare has increased insurance premiums, raised taxes, restricted choice, and made hardworking Americans lose their doctors and health care plans. Now the Obama administration wants to use your money to save this failed healthcare law by bailing out insurance companies who are themselves fleeing the Obamacare exchanges. Just this week, Aetna announced it plans to leave a large number of Obamacare exchanges. Full repeal of Obamacare must continue to be the goal of Congress. In the meantime, Congress should shut down all possible avenues that would bail out insurance companies to save the President’s failing law, and resist any attempts to extend these bailout provisions past the end of this year.