GAO Says Congress Must Appropriate Funds In FY 2015 for ACA Risk Corridors Program

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By Sara Hansard

Sept. 30 — The Government Accountability Office issued a legal opinion Sept. 30 saying Congress must include language in its fiscal year 2015 appropriation to allow the government to collect user fees from health insurers that can be used to defray some insurers' losses.

The opinion, addressed to two congressional Republicans, concerns a temporary “risk corridors” program under the Affordable Care Act designed to limit the losses and gains of qualified health plans participating in the marketplaces during 2014-2016.

Congressional Republicans, who have criticized the program as a potential bailout for insurers, used the new legal opinion to bolster their position. “GAO has confirmed beyond dispute that the Department of Health and Human Services has no legal authority to disburse risk corridor payments under Obamacare absent a congressional appropriation,” Senate Budget Committee ranking member Jeff Sessions (R-Ala.) said in a release. House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) added, “We had serious concerns with the legality of the Obama administration's plan from the get go, and the government's watchdog confirms we were right.”

The House Energy and Commerce Committee said in a release that the opinion demonstrated “that the administration lacks a congressional appropriation to use taxpayer dollars to cover insurance company losses in 2015 under the health law's risk corridor program.”

Language Needed on Insurer User Fees

The GAO opinion said, “Language appropriating `such sums as may be collected from authorized user fees' would need to be included in the CMS PM [program management] 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).” The latter section, 1342(b)(1), covers the compensation payment to insurers for losses, while Section 1342(b)(2) describes the payments that plans must make to the government if premiums exceed certain costs.

The program was originally expected to be budget-neutral, but many believe that insurers may incur greater losses for 2014 than expected because people who had health problems enrolled more heavily in 2014 than healthier people.

The opinion by GAO General Counsel Susan Poling said the CMS PM appropriations for fiscal 2014 “would have been available to CMS to make the payments specified in section 1342(b)(1).” However, it said, “for funds to be available for this purpose in FY 2015, the CMS PM appropriation for FY 2015 must include language similar to the language included in the CMS PM appropriation for FY 2014.”

The first collections from insurers and payments to insurers are to be made in the summer of 2015.

Contentious Issue

The program has become a contentious issue between the Obama administration and congressional Republicans. A Congressional Research Service memo in February said that money to fund the program must be appropriated by Congress (see previous article). Sen. Marco Rubio (R-Fla.) has introduced the Obamacare Taxpayer Bailout Prevention Act (S. 1726) that would repeal the risk corridors program, and the legislation has been introduced in the House (H.R. 3541) by Rep. Tim Griffin (R-Ark.).

However, in June, Health and Human Services Secretary Sylvia Mathews Burwell sent a legal analysis to Upton and Sessions, saying that the HHS is legally justified to make payments for the risk corridor program as user fees (see previous article). Upton and Sessions requested the opinion from the GAO that was issued Sept. 30.

The HHS will operate under FY 2015 funding provided through a continuing resolution that lasts through Dec. 11.

The program was originally expected to be budget-neutral, but many believe that insurers may incur greater losses for 2014 than expected because people who had health problems enrolled more heavily in 2014 than healthier people. If so, insurers may need more money from the HHS or they could have to raise premiums more steeply in the future.

HHS, AHIP Comments

“We are pleased that the GAO affirmed the Department's authority to use fees it collects from issuers to fund the Temporary Risk Corridors Program, an important initiative designed to help encourage more issuers to participate in the Marketplace and compete on price and quality, ultimately giving consumers more affordable coverage options,” HHS spokesman Kevin Griffis told Bloomberg BNA Sept. 30 in an e-mail.

The agency said in a background statement it anticipates that “risk corridors collections will be sufficient to pay for all risk corridors payments.”

Responding to an inquiry about the risk corridors program and GAO's opinion, America's Health Insurance Plans spokeswoman Clare Krusing said in an e-mail to Bloomberg BNA Sept. 30, “Eliminating this market-stabilizing program could mean higher premiums, which is the last thing consumers are looking for right now.”

To contact the reporter on this story: Sara Hansard in Washington at shansard@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com

The legal opinion is available in HealthDocs™.