A simmering dispute over the risk corridor program has broken into the presidential campaign, with Senator Rubio crowing that an arcane budget move has “kill[ed] Obamacare” and “saved the American taxpayer $2.5 billion.” On account of that move, health plans are set to receive only pennies on the dollar from the risk corridor program, which was supposed to cushion them from big losses.
I agree with Tim Jost that Rubio’s budget move has “ drawn some blood.” In particular, the demise of many of the co-ops has been chalked up to low risk corridor payments. But in crucial respects, the dispute seems overheated. Unless I’m mistaken, Rubio hasn’t saved the American taxpayer a cent. Eventually, health plans will recover everything they’re owed.
Let me bring you up to speed. To entice health plans to participate on the new exchanges, the ACA created a temporary program designed to buffer health plans against unanticipated losses in 2014, 2015, and 2016. Plans that made more than they anticipated would give some of that excess profit to the federal government. By the same token, the government would return some money to plans that got hammered.
The Obama administration soon came to recognize that the risk corridor program contained a serious flaw: the ACA didn’t appropriate any money to fund it. To sidestep that problem, administration lawyers devised a legal theory that allowed HHS to use the money it received from profitable plans to make payments to unprofitable plans.
But what happens if the program doesn’t take in enough money to cover its obligations? At Rubio’s insistence, Congress in 2014 passed a budget bill prohibiting the administration from using other funding streams—the budgetary equivalent of looking under the couch cushions for change—to make up for any shortfall.
Rubio’s bill has now come back to bite the administration. On October 1, HHS announced that, for 2014, health plans were owed substantially more under the risk corridor program than they paid in. Unprofitable plans will thus receive just 12.6% of what they were supposed to.
The administration hopes to make it up to these health plans: if it collects more than it’s obligated to spend in 2015 and 2016, it’ll use that money to pay them back. But if the administration still comes up short, it doesn’t have good options. The administration has vaguely said that it will “use other sources of funding for the risk corridors payments, subject to the availability of appropriations.” But the budget bill limits the administration’s power to dip into other funds, and a Republican-controlled Congress isn’t likely to appropriate money for a program that’s been decried as an insurer bailout.
But there’s another option, one that hasn’t received much attention. When Congress creates an entitlement directly in legislation, the person who’s supposed to get the entitlement can file a lawsuit in the Court of Federal Claims to recover what she’s owed. That’s why plans should still be able to get their cost-sharing reductions, even if the House of Representatives prevails in its case over whether an appropriation exists to cover the cost-sharing reductions.
The same principle holds (1) where Congress vests a federal agency with the power to obligate the United States to make certain payments and (2) the agency welches on those obligations. Here, the ACA instructs HHS to create a risk corridor program requiring the government to pay health plans a given amount of money. If the past is any guide, plans should be able to sue if HHS doesn’t pay them in accordance with the program. That’s so whether or not Congress has appropriated money to fund the program.
To be clear, I’m no expert in appropriations law, and the best analogies I can find arise in connection with an agency’s authority to enter into contracts with private parties. The contractual analogy to the risk corridor program is close but imperfect: health plans choose whether or not to participate on exchanges, but they don’t individually negotiate risk corridor contracts.
Still, I doubt the contractual wrinkle makes a difference. HHS apparently doesn’t either: it announced two weeks back that it “is recording those amounts that remain unpaid … as [an] obligation of the United States Government for which full payment is required.” If HHS, pursuant to clear statutory authority, has made binding financial commitments to health plans, those commitments should be enforceable in court.
That’s small consolation to the co-ops that needed risk corridor payments now to stay afloat. But the question for health plans isn’t whether they’ll get paid. It’s when. Marco Rubio hasn’t killed Obamacare and he hasn’t saved taxpayers any money. All he’s done is throw a wrench in the works.