Yesterday, The Los Angeles Times ably reported on how a little noticed regulation issued May 16 opened the door for the Department of Health and Human Services to spend billions of taxpayer dollars bailing out health insurance companies through Obamacare's "risk corridor" program.
Contacted by The Wall Street Journal to confirm the story, this is how the Obama administration responded:
Officials from the Department of Health and Human Services, however, say the Times is reporting nothing new. The provisions were part of routinely issued regulations surrounding the law and have been part of Obamacare since the law was passed in 2010.
The insurer compensation, which the Times says involves “billions of dollars,” is part of a three-year program that helps carriers cover extra costs if a disproportionate number of enrollees are sicker than expected and usually are part of what are called “risk corridor” provisions, department spokeswoman Erin Shields Britt (no relation to the author of this post) said in a statement. Those same provisions were included in the Medicare Part D program that was passed in 2006, Britt said.
Further, the Congressional Budget Office has been evaluating Obamacare’s risk corridor since the law was passed and determined that it would either be revenue neutral or may even create a surplus if there is no compensation for insurers, Britt said. She added that Medicare Part D created a $4.8 billion surplus between 2006 and 2013.Give HHS spokeswoman Erin Shields Britt a raise. This is a textbook example of Washington spin and the Wall Street Journal's Russ Britt fell for it hook, line, and sinker.
First, Shields Britt is correct that the risk corridor program was created along with the rest of Obamacare way back in 2010. However, the regulations issued last Friday are absolutely new and they are only "routine" in the sense that far too often our federal government issues new regulations that benefit large corporations at the expense of taxpayers.
What Russ Britt failed to report is that HHS has flip-flopped on the budget neutrality of the risk corridor program as the regulation process has proceeded. Back in March of this year, when HHS first issued the preliminary rule, HHS said the risk corridor program would be run in a "budget neutral fashion." In other words, insurance companies claiming losses from Obamacare could only take as much money out of the program as other companies claiming profits were putting in.
But the insurance lobby freaked out about this regulation. Their lobbyist in Washington, America's Health Insurance Plans, issued a letter to CMS demanding that, "risk corridors should be operated without the constraint of budget neutrality." In other words, the insurance lobby wanted a guarantee that if Obamacare's losers wanted more money out of the risk corridor program than Obamacare's winners were paying in, that U.S. taxpayers would be forced to pay the difference.
And that is exactly what happened Friday. Shields Britt employer, HHS, issued a new regulation guaranteeing that taxpayers would be on the hook for an insurance industry bailout if insurance companies ended up paying less money into the risk corridor program then they wanted to take from it.
Shields Britt's invocation of CBO's estimation that the risk corridor program would be budget neutral is also very clever. CBO did estimate that the program would generate net revenues for the federal government. But what if the CBO is wrong? The CBO often gets things wrong, especially about health care. And if the CBO's prediction that the program would make money or break even is so good, then why did the insurance lobby push so hard to make sure the program was "operated without the constraint of budget neutrality"?
As the LAT noted in their write up, Obama's commitment to insurance companies that he will illegally use taxpayer funds to bail them out, comes at a key time for Obamacare.
The insurance companies are all busy setting their premiums for next year. Without a guaranteed taxpayer bailout, insurance companies will set their premiums higher to protect themselves from financial loss. But if insurance companies know that taxpayers are on the hook for losses, than insurance companies are free to set their premiums low. Obama is essentially subsidizing health insurance company efforts to gain market share by underpricing their product at taxpayer expense.
Republicans can still stop this illegal bailout, but only if they are willing to cut funding to HHS through the appropriations process this September.