October 1, 2014

GAO: Admin Needs Congress To Approve Insurer Payments Under Obamacare

The Obama administration can’t spend funding on a bailout for insurance companies in Obamacare exchanges without an express appropriation from Congress, according a nonpartisan legal opinion.

The health-care law’s controversial risk corridors provision allows Obamacare administrator the Centers for Medicare and Medicaid Services to collect user fees from insurers taking part in Obamacare exchanges and, presumably, to redistribute them to the companies that are struggling the most.

The program is intended to incentivize insurers to join Obamacare exchanges, cutting back on any fear they might have of pricing their health plans too low and taking a large financial hit by attracting sick, expensive customers.

The Obama administration believes that it can hand out this money on its own, without congressional approval, because the text of the Affordable Care Act provides that the Health and Human Services secretary “shall pay” risk corridor funding to exchange health plans that qualify (although that power’s now been delegated to the CMS chief). But according to the General Accountability Office, that’s not the case.

“The making of an appropriation must be expressly stated in law,” the GAO found. “It is not enough for a statute to simply require an agency to make a payment.” 

That said, according to the GAO, the congressional appropriation to CMS for fiscal year 2014 did give current CMS administrator Marilyn Tavenner the authority to distribute the funds.

But CMS won’t hand out any risk corridor payments until the next fiscal year, officials told the GAO. That means 2015 appropriations must include funding for “other responsibilities of the Centers for Medicare and Medicaid Services” in order for the risk corridor payments, which the Obama administration has already promised to nervous insurers, to be available.

It’s an especially pressing political issue in light of changes to the program the Obama administration made earlier this year. Under intense pressure from insurers, who had been threatening to hike premium rates drastically in the months before November midterm elections, CMS opened the door to expanding the program. 

While officials had claimed the risk corridor provision would be budget neutral, only redistributing the user fees collected, that may no longer be the case. So many insurance companies have been faced with such costly claims, the administration paved the way for using taxpayer funds to cut Obamacare insurers’ losses as well, amounting to a bailout. 

Needless to say, getting a bailout of any kind through Congress, especially one run by Republicans if the GOP takes the Senate in November, will be extremely difficult. 

“I hope this nips in the bud any ideas this overreaching Administration might have of paying out money not appropriated by Congress,” said Senate Budget Committee ranking member Sen. Jeff Sessions, who requested the legal opinion along with House Energy and Commerce Committee chairman Rep. Fred Upton.

“We had serious concerns with the legality of the Obama administration’s plan from the get go, and the government’s watchdog confirms we were right,” Rep. Upton said.

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