Health Insurers Might Collect $1 Billion In ACA Risk Corridor Payments in 2014

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By Sara Hansard  

June 18 — Health insurers that cover three-quarters of enrollees in Affordable Care Act marketplace plans expect to collect payments from the law's risk corridor program, and those payments might exceed $1 billion, the chairman of a House Oversight and Government Reform subcommittee said at a hearing June 18.

That figure was based on information the committee obtained from 15 traditional insurance companies and 23 cooperatives, most of which said they expected to receive payments, said Rep. Jim Jordan (R-Ohio), chairman of the Economic Growth, Job Creation and Regulatory Affairs Subcommittee. “The information provided by the insurers suggests that the total taxpayer bailout could in fact well exceed $1 billion this year alone,” he said.

The ACA risk corridor program protects qualified health plans sold inside as well as outside the marketplaces against underestimating premiums by collecting a portion of profits if a company makes money and paying off a portion of losses if a company loses money. The program is effective from 2014 through 2016.

Legal Authority Needed

At the hearing, the Senate Budget Committee's ranking member, Jeff Sessions (R-Ala.), testified that the Obama administration doesn't have the legal authority to administer the risk corridor program without an explicit congressional appropriation.

Sessions cited a May 2 Congressional Research Service (CRS) memorandum that said under long-standing interpretations by the Government Accountability Office, “an appropriation must consist of both a direction to pay and a specified source of funds.” The ACA “does not appear to clearly specify a source of funds from which those payments are to be made,” the memorandum said. Sessions noted that a Jan. 23 CRS memo said the same thing.

“Without an explicit appropriation any money spent on this program would be an illegal transfer of funds,” Sessions said. “It's bedrock constitutional law.”

CCIIO Official Cites User Fee Authority

But Mandy Cohen, acting director of the Center for Consumer Information and Insurance Oversight, testified that the administration has the authority to administer the risk corridor program without an appropriation, using its authority to collect user fees from insurers.

CCIIO's Mandy Cohen testified that the administration has the authority to administer the risk corridor program without an appropriation, using its authority to collect user fees from insurers.

The Department of Health and Human Services made two changes to the risk corridor program, Cohen said. In states that chose to allow health plans that don't comply with the ACA to continue, the HHS made adjustments to the program, and it also made changes related to administration costs, she said. The Obama administration issued regulatory guidance and a final rule March 5, allowing noncompliant plans to be extended for an additional two years, for plans beginning on or before Oct. 1, 2016.

The Congressional Budget Office said Feb. 4 that the risk corridor program would result in $8 billion more in payments to the federal government from insurers than would be collected from insurers. In April the CBO said the program would break even over its three-year life, and Cohen said the HHS continues to believe the program “ultimately will be budget-neutral.”

However, if the program costs the government more than it collects, “Our authority to make those payments comes from our ability to levy user fees,” Cohen said. The user fees would be levied on insurance companies to finance the market stabilization program, she said. The HHS “just recently provided legal analysis to GAO” on the issue, and she said the HHS would share the analysis with the committee.

A June 18 letter from HHS Secretary Sylvia Mathews Burwell to Sessions and House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) contained the legal analysis Cohen referred to.

Rep. Matt Cartwright (D-Pa.), ranking member of the subcommittee, said the May 2 CRS analysis “suggested that the secretary of HHS does have authority to make such payments in the unlikely event they would have to be made, and that that authority could be derived from appropriations language in the president's budget for fiscal year 2015 giving the Centers for Medicare & Medicaid Services the general authority to collect `such sums as may be collected from authorized user fees, which shall be credited to this account and remain available until expended.'”

“The president's budget is something that Congress passes,” Jordan responded. “The president proposes all kinds of things,” he said. “Just because he proposes it doesn't mean it's constitutional.”

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

To contact the editor responsible for this story: Janey Cohen at jcohen@bna.com