It’s time to pay for the deal they made with the Democrats on Obamacare.
In Christopher Marlowe’s Doctor Faustus, the sinful sawbones eventually thinks better of his bargain with the devil and does his best to weasel out of the deal. A number of health insurers, having made similarly cynical arrangements with the Obama administration, are now attempting to use the court system to escape the consequences of their cupidity. Knowing full well that they couldn’t make legitimate profits selling coverage through Obamacare’s exchanges, they relied on Democrat guarantees that their losses would be covered by the taxpayers. But a funny thing happened on the way to easy profits. Congress refused to appropriate the funds.
The insurance companies in question were told by the Obama administration that they could expect to have their bottom lines propped up by the “risk corridor” program. The magical thinking behind this boondoggle was that insurers enjoying big profits from Obamacare would pay into a pool from which less fortunate plans would be subsidized. In late 2015, however, the Centers for Medicare & Medicaid Services (CMS) announced that profitable insurers had paid in a mere $362 million while their unprofitable counterparts had requested $2.87 billion to cover their losses. Thus, the losers would be paid only 12.6 percent of their requests.
Since that unwelcome news was delivered, Health Republic Insurance Company has filed a class action lawsuit against the government for $5 billion, Highmark Health has sued for $223 million, Moda Health filed a $180 million suit, Blue Cross & Blue Shield of North Carolina has sued for $129 million, and Land of Lincoln Health has filed a $70 million suit. It isn’t clear that these lawsuits are going anywhere. The defendant in the class action suit, for example, is “The United States of America” and the plaintiffs ask the court to strike down provisions of two congressional budget resolutions that require the risk corridor program to be budget neutral.
But only Congress has the power to make that call. As U.S. District Judge Rosemary Collyer put it in a ruling against the Obama administration in a similar case involving unauthorized HHS spending, “Congress is the only source for such an appropriation … See U.S. Constitution, Art. I, § 9, cl. 7 (‘No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.…’).” And a budget resolution becomes law once it has been signed by the President. That’s why the 2015 spending bill is titled, “Public Law 113–235.” Yet the Health Republic class action suit holds that losses somehow render the law invalid:
The practical effect of the 2015 Spending Bill was to prevent CMS and HHS from paying QHPs [Qualified Health Plans] their full risk corridor receivable due for 2014. This created an extraordinary burden on QHPs because, as many industry experts predicted, 2014 was an incredibly tumultuous year in the new market. During 2014, QHPs incurred almost $2.9 billion in losses that were compensable under the risk corridor provisions of the ACA. However, due to the 2015 Spending Bill, over $2.5 billion of those mandatory risk corridor payments for 2014 were not paid. On information and belief, the QHPs incurred even greater compensable losses in 2015 that CMS and HHS cannot pay as a result of the 2016 Spending Bill.
The real problem here is not the Spending Bills, of course. It is that Obamacare was designed and implemented with such incredible ineptitude that CO-OPs like Health Republic and Lincoln Health were doomed from the start. Likewise, it was inevitable that for-profit insurers selling coverage under the aegis of Obamacare were going to lose money—and lots of it. But the Democrats who wrote the “reform” law expected to be in power a lot longer than the six years it took for the voters gave them the bum’s rush, so their plan to provide an endless stream of taxpayer funds to these insolvent CO-OPs and complicit insurers went awry.
In 2012, however, the voters gave the Republicans back their majority in the House of Representatives. And, in 2014, they reinstated the GOP’s Senate majority. The performance of these Republicans has been disappointing in many ways. Still, by making the risk corridors budget neutral, they exposed the fundamental fiscal instability that defines Obamacare. This requirement was inserted largely due to a quiet effort by Senator Marco Rubio for which he has been savaged by the “news” media. The Washington Post, for example, described the Rubio contribution as follows: “a poison pill that is killing Obamacare from within.”
This is not an exaggeration. The restriction on using general funds to keep Obamacare afloat will drive the few remaining CO-OPs out of business and the remaining insurers out of the exchanges. Neither the Obama administration nor the congressional Democrats with whom they made their cynical deal can save them. In the end, the Devil will have his due.
The Devil and Dr. Faustus Meet (Wellcome Images/Creative Commons)