Secretary of Health and Human Services Sylvia Burwell said on Thursday that, while she didn't anticipate the need to do so, the agency was prepared to work with Congress to free up more money for the insurance industry should carriers report excessive losses through President Obama's healthcare law.
But it's far from guaranteed that Republicans in Congress will be eager to bail the program out, which creates the potential for a huge spike in insurance premiums down the road.
Through the "risk corridors" program, HHS is aiming to stabilize the insurance market on the new health insurance exchanges during the early years of Obamacare. Because the law requires insurers to offer coverage to those with pre-existing conditions and limits how much insurers can charge older and sicker patients, insurers who join the exchanges risk getting stuck with a disproportionate number of older and sicker beneficiaries, translating into losses that could discourage companies from participating.
The risk corridors program is supposed to work by making payments to insurance companies who experience higher-than-expected medical losses from a stream of money collected from insurers who have lower-than-expected losses. But a scenario in which the risk pool is so skewed toward older and sicker Americans that there are large industry-wide losses could result in a de facto bailout of the insurance industry by requiring an injection of money from taxpayers.
In a legal opinion last month, in response to an inquiry from Sen. Jeff Sessions, R-Ala., and House Energy and Commerce Committee Rep. Fred Upton, R-Mich.,the General Accountability Office said that HHS could not dip into other funds to make risk corridor payments to insurers that exceed the money collected from insurers, unless Congress wrote appropriations language in a way that allowed it.
Asked about the issue by the Washington Examiner, Burwell acknowledged that she would have to work with Congress if additional money was needed.
"Don’t think it’s a question that we need to face right here in [fiscal year 2015]," she said during a media breakfast hosted by Health Affairs at the offices of the Kaiser Family Foundation. "If it ever does become a question, I think we’ve been clear we’ll work with the Congress on any additional language that we need."
The program is scheduled to be in place for the 2014 through 2016 benefit years (with payments due in fiscal years 2015 through 2017), and it's one of several provisions that are supposed to act as training wheels until the risk pool of the health insurance exchanges has stabilized. Without it, insurers warn that premiums will have to rise to make up for the additional risk they'd be assuming, and it could discourage some insurers from participating in the exchanges altogether.
For now, this issue is under the radar. But if insurers do report excessive losses entitling them to large payments from HHS, it could lead to major showdown between the White House and Congress. Sen. Marco Rubio, R-Fla., and Rep. Tim Griffin, R-Ark., both introduced bills that would repeal the risk corridors. But there was never a widespread effort to repeal the program, as the prevailing sentiment was that if Republicans repealed the program, it would allow Democrats to shift blame for rising premiums away from Obamacare and onto the GOP. That political calculation could change if the program did report excessive losses and HHS came hat in hand to Congress asking to be rescued.