Republicans charge that the Obama administration has diverted $3.5 billion in taxpayer funds to help prop up Obamacare, an allegation Democrats say is "overblown rhetoric" and that no taxpayer funds are being used.
The House Energy and Commerce Committee's Oversight and Investigations Subcommittee held a hearing Friday on Obamacare's reinsurance program.
The program, which expires in 2017, is intended to help insurers transition to the new individual market created by Obamacare's exchanges in 2014. Insurers pay in to the program, and that funding is used to help offset the claims for the sickest patients.
The program was created to help insurers transition to an individual market that can no longer deny people insurance if they have a pre-existing condition, a provision created under the law.
However, a portion of the program's payments was supposed to be diverted to the Treasury Department as a deficit reduction measure, Republicans on the panel said.
The GOP pointed out that now the Treasury isn't going to get that money due to a change of heart from the Centers for Medicare and Medicaid Services, which oversees Obamacare.
"Despite issuing two final rules that allocated a portion of the reinsurance payments to the U.S. Treasury, CMS changed its position to prioritize payments to insurers," said Rep. Tim Murphy, R-Pa., chairman of the subcommittee. "Essentially, CMS ruled that the Treasury doesn't get any money until the insurers got paid."
Murphy argues that CMS' decision "contradicts the plain language of the law."
An administration official responded that CMS believes the reinsurance action was within the law.
"We believe we have the statutory authority," acting CMS Director Andy Slavitt said at the hearing. "The statute is very clear when $12 billion is collected and silent when different amounts [are] collected."
Murphy linked the reinsurance program to the mortgage securities market documented in the Oscar-winning movie "The Big Short," which detailed the fall of the housing market in the mid-2000s.
Murphy said that he was worried about a similar collapse of the insurance market when the reinsurance program expires and can't prop up insurers.
Slavitt responded that the reinsurance payments are funded by insurers and not through taxpayers.
"It really is a very common technique to make sure that people with large claims can get covered," he said. "I think the market now has a better feel for the people who are being insured, and I think that wasn't the case three years ago."
Democrats on the panel said Republicans are levying false charges about the controversial healthcare law.
"This type of overblown rhetoric and misinformation is typical when it comes to my Republican colleagues and the Affordable Care Act," said Rep. Frank Pallone, D-N.J., ranking member of the committee.
The program is "funded entirely from contributions from insurance companies," Pallone said.
He added that a similar reinsurance program was included in the law that created Medicare Part D, which was supported by Republicans.
Parts of the reinsurance program have caused problems for certain insurers, however.
The risk corridor program, part of the three components of reinsurance, paid out only 12 percent of the funding requested by insurers. That is because not enough people paid in to the program, so insurers got about $362 million instead of the $2.9 billion they asked for.
The shortfall hit the taxpayer-funded, consumer-oriented and operated plans hard. Twelve of the 23 co-op plans shut down last year, with many citing the risk corridor shortfall as a primary reason.
The administration has responded that the reason some co-ops have struggled is because they are completely new insurers and that some startups will have problems.