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Did Obama Raise the White Flag Halfway on Obamacare's Insurer Bailout?
A sign waves from the top of insurance co. roof advertising for the Affordable Care Act, also known as Obamacare, as the company tries to sign people up before the February 15th deadline on February 5, 2015 in Miami, Florida. Numbers released by the gover

Did Obama Raise the White Flag Halfway on Obamacare's Insurer Bailout?

Jeffrey H. Anderson

Amid ongoing concern that President Obama will bail out his insurance company allies who’ve lost money selling Obamacare, his own Justice Department has now effectively admitted that he has no legal authority to do so. In a brief filed in federal court, the Justice Department argues that the federal government doesn’t owe insurers any taxpayer money, because Obamacare didn’t promise them any: “[S]ection 1342 [the risk-corridors section of Obamacare] does not require HHS to make risk corridors payments in excess of collections.” This is an important development in the ongoing fight over Obamacare’s insurer bailout.

Just two weeks earlier, the Department of Health and Human Services (HHS) had implied that an out-of-court settlement for insurers was on the way. A release from the department read, “HHS recognizes that the Affordable Care Act requires the Secretary to make full payments to issuers. HHS will record risk corridors payments due as an obligation of the United States Government for which full payment is required.” HHS continued, in an apparent invitation to insurers, “[W]e are open to discussing resolution of those claims. We are willing to begin such discussions at any time.”

The Washington Post subsequently ran an above-the-fold headline declaring, “Payouts in works to shore up ACA.” Parroting its Obama administration sources, the Post claimed that the bailout money is merely what “the government owes” insurers and “what the insurers are owed,” and that the risk-corridor program “originally was not supposed to pay for itself,” until Republicans altered it. As I replied at the time, those claims are false.

Now the Justice Department seems to agree. Its 45-page brief argues that the government doesn’t owe any money; that insurers aren’t owed any money; and that the risk-corridor program was originally supposed to pay for itself, without the benefit of taxpayer money. (Some insurers would pay in; other insurers would take out.) Indeed, the disconnect between what HHS has argued and what Justice is now arguing is so pronounced that Juniper Research Group CEO Chris Jacobs wonders whether the Obama administration is at war with itself—specifically, whether its political appointees and its career civil servants are at war with each other.

The Justice Department’s legal brief states:

Land of Lincoln [Mutual Health Insurance Company] seeks relief in this Court, but its claims fail as a matter of law….

Section 1342 [the risk-corridor section of Obamacare] does not require HHS to make risk corridors payments beyond those funded from collections. And even if that intent were unclear when the Affordable Care Act was enacted in 2010, Congress removed any ambiguity when it enacted annual appropriations laws for fiscal years 2015 and 2016 that prohibited HHS from paying risk corridors amounts from appropriated funds other than collections….

Congress neither established the risk corridors program as one based in contract nor conferred authority on HHS to bind the United States in contract for such payments.

The Justice Department brief then proceeds to make several important points, including noting that Congress provided funding for other parts of Obamacare in the original 2,400 legislation, but not for the risk-corridor program:

Although Congress expressly appropriated funds in the ACA for many programs and authorized funding for others, Congress did not include in the ACA either an appropriation or an authorization of funding for risk corridors….

Congress has not mandated that HHS make risk corridor payments in excess of collections. Rather, Congress planned the program to be self-funding….[N]othing in section 1342 requires HHS to make up a shortfall in collections….The statute contains no reference to any other source of funds….

[S]ubsection (b) [of section 1342] merely describes the 'methodology' to be applied by HHS as it adjusts funds between plans 'under the program'; it nowhere states that HHS or the United States must provide additional funds to insurers when the funds available 'under the Program' fall short of the statutory amounts….

Congress omitted from the ACA the explicit statutory language that obligates the Secretary to make payments under the Medicare Part D risk corridors program in excess of amounts collected under that program.

The brief then draws attention to how the risk-corridor program’s expected revenue-neutrality—the expectation that it would not function as a bailout—influenced the Congressional Budget Office’s scoring, which was “critical” to securing Obamacare’s passage:

[W]hen the CBO performed a cost estimate contemporaneously with the Affordable Care Act's passage, it omitted the risk corridors program from its scoring….The CBO's cost estimate was critical to ACA's passage, and was referenced in the text of ACA itself….

And that critical estimate of ACA's fiscal consequences was predicated on the understanding that the risk corridors program would not impose liability on the government for payments in excess of amounts collected under the risk corridors program.

Finally, the brief says that Congress’s intentions—specifically its opposition to the program’s functioning as a bailout—are quite clear at this point:

[E]ven if Congress's intent to limit the United States' liability to the extent of risk corridors collections were unclear at the time the ACA was enacted, by the time any payments could be made, Congress had 'directly spoken' to the issue by restricting the use of HHS funds to support the risk corridors program.

In light of these statements by his own Justice Department, it would be very hard for Obama to turn around and implement a unilateral executive bailout of insurance companies. Obama, however, has done something similar before. Prior to decreeing that he would no longer deport illegal immigrants under 30 years of age—before subsequently decreeing that that roughly five million illegal immigrants who are parents of citizens are exempt from deportation and are even eligible for work permits—Obama said the following:

“With respect to the notion that I can just suspend deportations through executive order, that’s just not the case, because there are laws on the books….Congress passes the law. The executive branch’s job is to enforce and implement those laws….There are enough laws on the books by Congress that are very clear in terms of how we have to enforce our immigration system that for me to simply, through executive order, ignore those congressional mandates would not conform with my appropriate role as president.”

If Obama was willing to ignore his own legal and constitutional analysis in his determination to decree new federal immigration “law” from the White House, no one should put it past him to ignore the analysis of his own Justice Department in his quest to bail out his insurance company allies with money that Congress has never appropriated. Still, his Justice Department’s legal brief serves to highlight that any such actions by Obama would be in violation of our Constitution and laws.

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