No Obamacare Bailouts for Insurers Without Congressional Approval, Says GAO

By forcing Americans to buy their products, President Obama's signature Affordable Care Act is widely seen as a winning proposition for health insurance companies. Conscripted customers! What more could a well-connected business want? But the law's complex rules require insurers to cover the costs imposed by older and ailing customers with the payments from young and healthy customers. Potentially, a company could end up with a disproportionate ratio of sick customers drawn by the promise of subsidized coverage—drowning the seemingly winning proposition in red ink. If that happens, says the Government Accountability Office (GAO), the administration can't bail out insurers without permission from Congress.

The GAO decision comes in response to a congressional inquiry about the administration's "risk corridors" (officially, the premium stabilization programs) scheme, which would subsidize unprofitable plans by transferring money to them from those actually in the black under Obamacare. The risk corridors plan is a temporary measure intended to entice insurers to offer Obamacare coverage while the program gets on its feet. The assumption is that after 2016 plans will balance out costs and benefits because of those conscripted customers.

But it's not enough for a statute to require that an agency make a payment—the funds have to be legally available. As the GAO decision puts it, "At issue here is whether appropriations are available to the Secretary of HHS to make the payments specified" under the law. The GAO says they're not.

The problem for the administration is that collecting money and disbursing it through government agencies requires budgetary authorization. That authorization can only come from Congress, and must be authorized in each annual budget, year after year.

Language appropriating funds for "other responsibilities of the Centers for Medicare and Medicaid Services" would need to be included in the CMS PM appropriation for FY 2015 in order for it to be available for payments to qualified health plans under section 1342(b)(1). Similarly, language appropriating "such sums as may be collected from authorized user fees" would need to be included in the CMS PM appropriation for FY 2015 in order for any amounts CMS collects in FY 2015 pursuant to section 1342(b)(2) to be available to CMS for making the payments pursuant to section 1342(b)(1)

So, if Congress doesn't go along with the idea of gathering money from profitable health exchange insurers and handing it to unprofitable ones, the risk corridors idea is a non-starter.

Of course, Congress may authorize the payments because it doesn't have the backbone for another fight. That wouldn't be a shock. Or, the administration could ignore the GAO and use executive authority to make yet another unilateral change to the president's health plan. That also wouldn't be a shock.

But, if nothing else, the GAO decision is further evidence of the slapdash crafting of the Affordable Care Act, even when it comes to the legislative duct tape intended to hold it together.

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