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Washington Post Botches Defense of Obama's Insurer Bailout

Jeffrey H. Anderson

In his latest assault on the separation of powers, President Obama seems poised to take unilateral executive action—in direct defiance of legislation he signed—to bail out insurance companies under Obamacare. In its above-the-fold story on Friday, the Washington Post mischaracterizes Obama’s power grab in two important ways: First, it claims that the bailout money is merely what “the government owes” insurers and “what the insurers are owed.” Second, it claims that the program in question “originally was not supposed to pay for itself,” until Republicans altered it. Each of these claims is false.

Obamacare’s “risk corridor” program was designed to redistribute money in the Obamacare exchanges from health insurers who made money to those who lost money. Profitable insurers would pay in; unprofitable insurers would get paid out. With so many insurers losing money under Obamacare, however, the program was positioned to become a bailout, as there was no guarantee in Obamacare’s text that the money paid out wouldn’t exceed the money paid in.

Marco Rubio sounded the alarm in a Wall Street Journal op-ed in November of 2013. He highlighted that the risk-corridor program was poised to become a taxpayer-funded bailout of insurers when it went into effect the following year, and he introduced legislation to prevent this result. A little over two months later, however, the Congressional Budget Office projected that, far from costing taxpayers money, the risk-corridor program would actually be a windfall, netting $8 billion over a decade—as $16 billion would be paid in by insurers and only $8 billion would be paid out to insurers. The projection was implausible, but it scared off congressional Republican leadership—and Rubio, who didn’t push the issue again for several months.

Shortly thereafter, the Obama administration reassured the citizenry that the risk-corridor program wouldn’t function as a bailout, as Rubio had alleged, but would instead be budget-neutral. In the CBO’s account of things, “In March 2014, the Department of Health and Human Services issued a final regulation stating that its implementation of the risk corridor program will result in equal payments to and from the government, and thus will have no net budgetary effect.” Accordingly, the CBO altered its own projections in April of 2014, claiming that “risk corridor payments from the federal government to health insurers will total $9 billion and the corresponding collections from insurers will amount to $9 billion, thus having no net budgetary effect.”

So much for the Post‘s claim that the program “originally was not supposed to pay for itself.” It was.

It was rather obvious, however, that it wouldn’t—despite the administration’s public denials and the CBO’s optimistic estimates. For months to follow, many entities continued to push for legislation to codify this claim of budget-neutrality and protect taxpayers. The alarm was sounded by Heritage Action, the 2017 Project (which I ran), the House Oversight Committee, the House Energy and Commerce Committee, Senator Mike Lee, and others. Finally, in late 2014, congressional Republican leadership took action. Congress put an end to Obamacare’s insurer bailout, as it added language to the CRomnibus spending package stipulating that the risk corridors must be budget-neutral: No more could be paid out to insurers than was paid in by insurers. Taxpayers would no longer be on the hook for bailing out insurance companies. In December of 2014, Obama signed that legislation into law.

Congress had acted just in time. Whereas the Obama administration and the CBO both claimed the risk-corridor program would pay for itself, insurers paid $362 million into the program in 2014 and—if not for Congress’s having stopped the bailout—would have been paid out a cool $2.87 billion. For every $1 that was paid in, about $8 would have been paid out. Instead, insurers received only $362 million, and Congress saved taxpayers $2.5 billion.

Obama now seems determined to change that. He is reportedly planning another end-run around Congress—and the Constitution—by bailout out insurers with taxpayer money that Congress hasn’t appropriated. The Post reports, “Justice Department officials have privately told several health plans suing over the unpaid money that they are eager to negotiate a broad settlement, which could end up offering payments to about 175 health plans.” The Post explains, “The payments most likely would draw from an obscure Treasury Department fund intended to cover federal legal claims.” In other words, the administration is “eager” to settle with insurers and provide them the bailout that Congress, with Obama’s signature, expressly denied.

The obscure fund in question is the Treasury Department’s Judgment Fund. However, the nonpartisan Congressional Research Service—referencing prior opinions by the nonpartisan Government Accountability Office (GAO) and the Justice Department’s own Office of Legal Counsel—has found that, as a legal matter, “the Judgment Fund would not appear to be available,” and “any payment to satisfy a judgment…would need to wait until such funds were made available by Congress.”

As Juniper Research Group CEO Chris Jacobs highlights, a 1998 opinion by the Office of Legal Counsel in President Clinton’s Justice Department found the following:

“The Judgment Fund does not become available simply because an agency may have insufficient funds at a particular time to pay a judgment. If the agency lacks sufficient funds to pay a judgment, but possesses statutory authority to make the payment, its recourse is to seek funds from Congress.”

Jacobs writes that the Comptroller General—who is the director of the GAO and, in Jacobs’s words, “the keeper of the handbook of appropriations law“—issued a similar ruling that year in a parallel case. The Comptroller General ruled that Congress’s choice to bar the use of certain funds, as it did in the case of the risk-corridor program, “should not be viewed as an open invitation to convert the Judgment Fund from an appropriation to pay damage awards against the United States to a program account to circumvent congressional restrictions on the appropriations that would otherwise be available to cover these expenses.”

As even the Post highlights, the scale of abuse here would be extraordinary. The Post reports that the Judgment Fund’s website “shows that it has been used for a few hundred claims against HHS in the past decade. Taken together, they amounted to about $18 million.” The insurers are seeking $2.5 billion—more than 130 times as much.

To boil this down, Congress alone has the power of the purse. Congress has made clear—through duly passed legislation, signed by the president—that insurers are eligible for risk-corridor payments only in the amount that their fellow insurers have paid into that program. Contrary to the Post‘s claims, anything beyond that is not “owed” to insurers.

To the contrary, the $2.5 billion in question is taxpayers’ money, which Congress has not yet appropriated. If Obama appropriates it for himself, or more exactly for his insurance company allies, he will be doing so in violation of the Constitution and laws.

He will also be doing something that the American people plainly wouldn’t want to have done even if it were legal. Polling by McLaughlin & Associates—commissioned by the 2017 Project—asked, “If private insurance companies lose money selling health insurance under Obamacare, should taxpayers help cover their losses?” By a tally of 81 to 10 percent, respondents said no. (The poll included 38 percent Democrats and 31 percent Republicans.) It almost goes without saying that this is a winning issue for Donald Trump, for Republican House members, and for any Republican senators who will be facing the voters in just over a month.

Obama is poised to violate our Constitution and laws by spending money that Congress not only hasn’t appropriated but has said shall not be spent. He has no constitutional or legal power to do so. If the Republican Congress has any ambition with which to counteract Obama’s ambition, it won’t let him get away with it.

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