The spending bill released by Congress overnight dealt a victory to Obamacare oponents, blocking a bailout of insurers reporting losses through the healthcare program.
Payments to insurers through a once-obscure provision within the law known as the risk corridors have become a major issue as insurers have been losing money by participating in President Obama’s healthcare law, forcing some to contemplate exiting the market.
The matter has been elevated to presidential politics, as Sen. Marco Rubio, R-Fla., has highlighted his role in saving taxpayers billions of dollars in Obamacare bailout money through his leadership on the issue. Last month, he sent a letter to Congressional Republican leaders urging them to include language in the omnibus spending bill blocking payments to the program.
Under the risk corridors program, which runs from 2014 through 2016, the federal government is to collect money from health insurers doing better than expected and use those funds to provide a federal backstop to other insurers who incur larger than expected losses from rising medical claims.
The idea was to provide training wheels to insurers in the first years of Obamacare’s implementation, and to take away any incentive for insurers to cherry pick only the healthiest customers. But in practice, it has the potential to turn into an open-ended taxpayer bailout in the event of industry-wide losses, which Obamacare is seeing now.
Obamacare insurers have been racking up losses as they struggle to enroll enough healthy customers to offset the cost of covering sicker enrollees with higher medical costs. For the 2014 benefit year, insurers losing more than expected asked for $2.87 billion in government payments through the risk corridors program, but HHS only collected $362 million from insurers performing better than expected. Because this language was included in the last spending agreement, HHS was prevented from making up the $2.5 billion difference from general funds.
The insurance industry has been lobbying heavily for the full payments, which insurers believe they’re entitled to. The industry lobbying group America’s Health Insurance Plans is headed by Marilyn Tavenner, who previously oversaw the implementation of Obamacare as head of the Centers for Medicare and Medicaid Services. In a response last month, HHS said it viewed payments to insurers as an “obligation” of the federal government.
But the text of the omnibus spending bill agreed to by Congressional negotiators includes the following language preventing such payments: “SEC. 225. None of the funds made available by this Act from the Federal Hospital Insurance Trust Fund or the Federal Supplemental Medical Insurance Trust Fund, or transferred from other accounts funded by this Act to the ‘Centers for Medicare and Medicaid Services—Program Management’ account, may be used for payments under section 1342(b)(1) of Public Law 111–148 (relating to risk corridors).”
In plain English, the text means that HHS cannot use money from its general funds to subsidize insurer losses. The only money available will be whatever gets collected from insurers beating expectations.
Without being able to depend on the federal backstop, insurers are more likely to respond to losses by proposing higher insurance premiums. But on the flip side, Congress rewarded insurers in a tax bill by waiving a tax on health insurance premiums for a year. Since that tax is ultimately passed on to consumers, waiving it for a year would be one factor putting downward pressure on premiums as other factors drive up premiums.
AHIP was not happy with the deal, however.
“The latest budget deals do nothing to address the recent funding shortfall with the risk corridors program or make-up for the losses facing health plans in the Exchanges,” spokeswoman Clare Krusing wrote in an email to the Washington Examiner. “Health plans will continue to face instability in the market until Congress and the Administration act to make sure the program works as intended.”
