Acting CMS administrator Andy Slavitt now says the federal government plans to bail out the insurers for at least some of their losses. “HHS will record risk-corridors payments due as an obligation of the United States Government for which full payment is required,” he announced in a September 9 memo. Slavitt suggested the funds to cover these costs would most likely come from the DOJ’s Judgment Fund, a virtually limitless fund reserved for resolving legal disputes involving the federal government.
Paying off ACA insurers with the Judgment Fund would amount to a covert, multibillion-dollar taxpayer bailout of the health-insurance industry. That bailout would circumvent Congress in order to pay for an ACA program that federal law requires to pay for itself. (CMS was originally permitted to use funds outside the risk-corridor program to bail out unprofitable insurers. In 2014, however, Senator Marco Rubio led Congress to prohibit taxpayer money from being used to bail out failing insurers through 2016.) And in so doing, it would seize the power of the purse granted exclusively and explicitly to Congress by the Constitution.
From the Obama administration’s perspective, the move makes sense. In the short term, insurers are dropping out of participating ACA exchanges, citing massive losses and failure to collect from the risk-corridor program, putting the entire system and Obama’s legacy in jeopardy. In the long term, the Obama administration had hoped that a Hillary Clinton presidency would allow Democrats to implement Clinton’s proposed “public option,” permanently entrenching the federal government in the private health-insurance marketplace. But Donald Trump is now the president-elect, and stringing along insurers with promises of taxpayer-funded bailouts may be the only way to keep the ACA exchanges from collapsing until Democrats can regain control of Congress in 2018 and the presidency in 2020.