Insurers are entitled to subsidies regardless of what Congress has appropriated?
If you are one of those hidebound individuals who believe that the distribution of taxpayer funds from the U.S. Treasury is a congressional prerogative clearly delineated in Article I of the Constitution, Judge Thomas C. Wheeler of the U.S. Court of Federal Claims has some bad news for you. Wheeler has handed down summary judgments ordering the government to pay two separate insurers a total of $266 million that Congress has declined to appropriate. He awarded Moda Health $214 million in February and, two weeks ago, he awarded $52 million to Molina Healthcare pursuant to Obamacare’s unfunded “risk corridor” program.
Upon what authority does Judge Wheeler order the U.S. government to pay insurers taxpayer money that Congress hasn’t appropriated? Well, his reasoning is somewhat circular. In his recent ruling in favor of Molina Healthcare, the primary precedent he cites is his own ruling in Moda Health Plan, Inc. v. The United States. This is, as it happens, not as surprising as it first appears. Wheeler is the only judge to find for the plaintiffs in any of the two dozen or so lawsuits that Obamacare insurers have brought pursuant to the risk corridor program. Several others have already been dismissed, including two by judges on the same court.
The background on these lawsuits involves an empty promise made by the Democrats and the Obama administration to insurers willing to sell plans through Obamacare exchanges. These companies were told that they could expect to have their bottom lines propped up if they managed to lose money selling plans to individuals required by law to purchase coverage. The “thinking” behind the risk corridor program was that insurers enjoying big margins would pay into a pool from which less profitable plans would be subsidized. Like every other pledge made on behalf of Obamacare by the Democrats, this was so much pie in the sky.
In late 2015 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. And, because Congress passed a spending bill (Public Law 113–235) requiring the risk corridors to remain budget neutral, the losers like Molina and Moda were able to recover only 12.6 percent of their losses. A lot of insurers lost their bets on Obamacare and want the taxpayers to fund their stupidity. They found a sympathetic auditor in Judge Wheeler, who wrote the following in his ruling in favor of Moda Health:
There is no genuine dispute that the Government is liable to Moda. Whether under statute or contract, the Court finds that the Government made a promise in the risk corridors program that it has yet to fulfill. Today, the Court directs the Government to fulfill that promise. After all, “to say to [Moda], ‘The joke is on you. You shouldn’t have trusted us,’ is hardly worthy of our great government.”
This is nonsense of course. It wasn’t “the government” that made a promise in the risk corridors program. It was the Obama administration and its congressional accomplices. Our government isn’t a static entity that is obligated to fund dumb ideas into perpetuity simply because the CEO of Molina Healthcare actually believed the horse manure he was fed by the Democrats and the White House regarding Obamacare. This is why we have elections. If the 109th Congress decides to fund a bridge to nowhere, the 112th Congress can cut off the money. Likewise, the 113th Congress could and did require the risk corridor program to be budget neutral.
But the real problem here is not the spending bill that imposed budget neutrality. It is that the “reform” law was designed and implemented with such ineptitude that insurers like Molina and Moda were doomed from the moment they bet on Obamacare. It was inevitable that most insurers selling coverage through the exchanges were going to lose money. But the Democrats who wrote the health care law expected to be in power a lot longer than six years, and so did their collaborators in the insurance industry. The voters, however, had other ideas. Thus, the plan to provide a stream of corporate welfare to insurers went awry.
As for Judge Wheeler, his rulings will probably be overturned on appeal. Indeed, most of these lawsuits will never make it that far. Wheeler’s eccentric rulings will almost certainly turn out to be regarded as outliers. Much more typical will be the April ruling in Blue Cross Blue Shield of North Carolina v. The United States and the ruling in Land of Lincoln v. United States, in which the claims of the plaintiffs to an endless stream of taxpayer dollars are summarily dismissed. The Land of Lincoln ruling describes the basic problem with all of these lawsuits:
Paragraphs 1342(b)(1) and (2) of the Act provide that HHS “shall pay” and plans “shall pay” amounts due out and due in under the payment methodology described in Subsection 1342(b), but the Subsection is otherwise silent regarding deficits or excess funds under the risk corridors program … the implementing regulation states that qualified health plans will receive payments from HHS without any reference to any source of funding or appropriations apart from the “payments in.”
In English, this means the authors of Obamacare failed to provide for any source of payment beyond the “excess funds” contributed to the pool by the “highly profitable” carriers. If the people running Moda and Molina didn’t know their competitors would find some way to avoid sharing their ill-gotten gains, they deserve to be fired. And, if Judge Wheeler doesn’t know he can’t order Congress to appropriate money or command the U.S. Treasury to use the Judgment Fund to pay off insurance companies that were taken to the cleaners by the authors of Obamacare, then he needs to be on a park bench somewhere feeding the pigeons.