Obamacare leaves taxpayers vulnerable to special-interest cash grab

Obamacare is in trouble. Three of the nation’s five largest insurers have already largely retreated from the Obamacare exchanges, and a fourth is threatening to do the same. While the number of Americans nominally “covered” by insurance has increased, analysis indicates that premiums, deductibles, and other out of pocket costs have all grown under Obamacare. These increased costs, combined with a decline in the size of provider networks, have rendered existing health insurance plans all but useless for many Americans.

For the past few months, the Obama administration has been treading water on this issue, with the Department of Health and Human Services (HHS) issuing statement after statement qualifying Obamacare’s losses and trying to reassure the American people that the federal exchange was not circling the drain, as feared. The “fake it until you make it approach” has not been working, though – and the healthcare law’s problems continue to mount, making it necessary for the administration to explore its options.

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As part of this effort, the Obama administration has been trying to identify solutions that will encourage the remaining Obamacare insurers to continue participating in the healthcare exchanges. Recently, the president met with a group of health insurance company CEOs to talk about the healthcare law. For their part, insurers have made it clear that there’s one item on the policy agenda they would like to discuss: the subsidies insurers receive under Obamacare.

When Obamacare was created the plan’s architects reasoned that, in the first few years, insurers would have difficulties correctly pricing insurance plans for a new population of enrollees they had limited experience serving in the past. Obamacare’s creators proposed to deal with these initial pricing issues by providing for a few short-term risk management programs – namely the transitional reinsurance program and the risk corridor program.

The transitional reinsurance program collects a fee from insurers, and then redistributes the collected funds to insurers whenever they sustain large, unexpected losses on any of their plans – in essence, this program provides a sort of insurance for insurers. Part of the funds collected for this program were also supposed to be sent to the Department of Treasury to help pay for the healthcare law. However, the Obama administration distributed all of those treasury-designated funds to insurers instead, to help make up for larger than anticipated losses.

Likewise, the risk corridor program was supposed to collect funds from highly profitable insurance plans and redistribute them to plans with losses. Unfortunately, with insurers sustaining losses of $2.7 billion in 2014 alone, there wasn’t much by way of profits to collect and redistribute. Now, many insurers are suing the federal government for payments owed under the financially overdrawn program, and the Obama administration is exploring ways to expand insurer payments under the program.

The magnitude of insurer losses under Obamacare hint at much deeper problems with the healthcare law. But rather than delve too deep into those issues, insurers have instead opted to ask for more taxpayer funding. They not only want the government to settle and provide them additional payments through the risk corridor program, they also want to keep the transitional reinsurance funds that should have gone to the Treasury. They are currently fighting tooth and nail to keep the Taxpayers Before Insurers Act, sponsored by Representative Walker and Senators Rubio and Sasse, from restoring the $5 billion owed to the Treasury. And while they’re at it, insurers would like for both temporary programs to be extended into 2017 and beyond.

With billions of dollars hanging in the balance, Congress must take action. By passing the Taxpayers Before Insurers Act, Congress can recover the $5 billion illegally distributed to insurers through the transitional reinsurance program. Additionally, by continuing the budget neutrality provision already contained in the risk corridor program and passing legislation to prevent the Obama administration from using any other funding source, such as the “Judgment Fund”, to route taxpayer dollars back into the hands of insurers, Congress can stop the bail out of the risk corridor program. Taking these actions will send a clear message to the Obama administration and health insurance special interests: taxpayers will not pay for Obamacare’s mistakes.

Melissa Fausz is senior policy analyst at Americans for Prosperity.


The views expressed by authors are their own and not the views of The Hill.