Politics & Policy

An Important Test in the Fight against Obamacare Bailouts

(Pakhnyushchyy/Dreamstime)
The House should keep Democrats from raiding the Treasury to reimburse failing insurance companies.

On Wednesday, a House Republican task force is scheduled to release its recommendations regarding a health-care alternative that Congress and a new president can enact next year. It’s an important step in the fight against Obamacare, but a much more immediate, though less publicized, battle will also occur this week — one over the use of the Judgment Fund to pay out certain claims or settlements. This fight will test whether House Republicans can take concrete actions to undermine Obamacare.

The battle will occur in an unlikely venue: Consideration of the Financial Services and General Government appropriations measure, expected on the House floor beginning Wednesday. With that piece of legislation, the House can pass a provision I’ve written about recently at NRO: a prohibition on the use of the Judgment Fund to pay out rewards related to “risk corridor” lawsuits.

Related: How to Stop Insurer Bailouts

Some background on the issue, and the lawsuits: Risk corridors are one of two transitional programs designed to cushion insurers’ losses in Obamacare’s first three years. Through risk corridors, plans achieving high profits on insurance exchanges in the years 2014–16 would forfeit some of those gains, which would subsidize insurers who suffered large losses. At least, that’s the way it was supposed to work.

The reality has proven far different. While the administration repeatedly claimed that risk corridors would be budget-neutral — that is, payments to insurers with losses would equal payments into the system by insurers with gains — that hasn’t happened and isn’t likely to happen. The balky insurance exchanges, the administration’s unilateral change allowing some individuals to keep their pre-Obamacare insurance temporarily, and enrollment by sicker-than-average individuals all mean that insurers have lost billions selling Obamacare plans. As a result, insurers put in claims totaling $2.87 billion for 2014, asking the government to reimburse them. But because few insurers made profits, plans had paid only $362 million into the risk-corridor program, meaning that the administration could pay only 12.6 percent of the risk-corridor payment requests in 2014.

In a November 2015 memo, the Obama administration stated that the $2.5 billion in unpaid 2014 risk-corridor claims represented an outstanding obligation of the federal government. But an appropriations restriction enacted by Congress in 2015 prevents the Centers for Medicare and Medicaid Services (CMS), which manages Obamacare and the exchanges, from using additional taxpayer funds on unpaid risk-corridor claims.

Here’s where the Judgment Fund comes in. Multiple insurers have filed lawsuits seeking their unpaid risk-corridor claims from the federal government. The Obama administration, while sympathetic to their case, remains hamstrung by the language that prohibits CMS from bailing out insurers. But the Judgment Fund — administered by the Treasury, not CMS — currently contains no such restriction.

And that’s why the Financial Services appropriations bill this week matters in the fight against Obamacare. Enacting a restriction on the use of the Judgment Fund to pay any claims or settlements related to the risk-corridor lawsuits would prevent the Obama administration from using the fund as a back-door insurer bailout. Democrats have essentially encouraged the administration to do just that — settle the cases, pay the claims from the Treasury to circumvent the prohibition on a CMS-funded bailout, and give insurers a big, wet, multi-billion-dollar, taxpayer-funded kiss.

While Congress has multiple policy justifications — an aversion to both bailouts and Obamacare — to prohibit the use of the Judgment Fund to pay risk-corridor claims, it also has constitutional prerogatives to protect. The text of Obamacare nowhere contained an explicit appropriation for risk corridors, which is one reason CMS had to create a system by which incoming funds from some insurers had to finance funds outgoing to others. Then Congress went even further and explicitly included a prohibition on taxpayer-funded bailouts. Congress did this not once, but twice: first in December 2014 and then again last winter.

The Obama administration would like nothing better than to chuck those explicit congressional restrictions out the window and use the Judgment Fund to bail out its Obamacare partners-in-crime, Big Insurance. While the Congressional Research Service and the comptroller general of the Government Accountability Office have both ruled that the Judgment Fund cannot be used to spend money where Congress has explicitly declined to appropriate funds, the House should not rest on its laurels and assume that this imperial president will follow the guidance of these nonpartisan experts. It can, and should, go further to protect taxpayer funds and rein in the administration.

Even as it unveils its alternative to the law, House Republicans have the chance to take a critically important step to undermine Obamacare this week. Both to save the country from Obamacare and to preserve its constitutional power of the purse, the House should match deeds with words and prevent the Judgment Fund from being used for a multi-billion-dollar Obamacare bailout.

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