Republican Senators express concern over potential Obamacare bailout

Republican Senators have sent a letter to the Secretary of Health and Human Services and the administrator of the Center for Medicare and Medicaid Services expressing concern about an apparent attempt to bail out Obamacare insurers using legal settlements. From the Hill:

Sens. Marco Rubio (R-Fla.), Mike Lee (R-Utah), Ben Sasse (R-Neb.) and John Barrasso (R-Wyo.) wrote a letter to the administration warning against financial settlements with insurance companies. Those companies have sued over a shortfall in an ObamaCare program known as risk corridors.

“We write to express our grave concerns regarding the potential participation of your departments in a multibillion dollar bailout of select health insurance companies through the Affordable Care Act’s Risk Corridors Program,” the senators write in the letter to Attorney General Loretta Lynch, Secretary of Health and Human Services Sylvia Burwell and Centers for Medicare and Medicaid Services (CMS) Acting Administrator Andy Slavitt.

At issue is the risk corridors program which was designed to balance out gains and losses among competing insurance companies during the first three years of Obamacare’s operation. However, losses were so much greater than windfalls in 2014 that there was not nearly enough money to make insurers whole. In fact, CMS was only able to cover about 12% of insurer’s losses.

Republicans, who suspected that the Obama administration would attempt to bailout the insurers using taxpayer money, inserted a provision in two bills which made risk corridors budget neutral. In other words, no money could be taken out that wasn’t put there by insurers paying in.

Insurers sued the administration claiming they were still owed the money and the Obama administration issued statements saying it agreed the government owed the money, but with Republicans holding the purse strings in congress it was impossible for the White House to complete the planned bailout.

However, as I pointed out earlier this month, the Obama administration appears to be trying to get around congress by offering to settle lawsuits and using something called the judgment fund to pay off insurers. In their letter, Republicans argue this end run will not work according to a report by the Congressional Research Service. From the Hill:

“The Judgment Fund would not appear to be available to pay for such judgments under current law,” the CRS found.

In their letter, the senators ask the administration where it plans to get the funds for any settlements with insurers.

The Obama administration realizes that its health program is in trouble. If it can’t bailout insurers, chances are good even more will drop out of the exchanges. That reduction in competition will make it more likely prices continue to rise sharply. And higher prices will discourage healthy adults (especially those not receiving subsidies) from signing up. That’s the beginning of the so-called death spiral or, as I prefer, the zombie spiral (since it won’t really die). The administration appears to be trying to stave this off with more taxpayer money but it lacks the appropriation to do so.