House Panel Takes Aim At Obamacare Program That Could Cue $1 Billion Taxpayer ‘Bailout’

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A House subcommittee took on one of Obamacare’s most controversial provisions Wednesday, warning that experts and insurers are expecting the Obama administration to hand out up to $1 billion in taxpayer funding to insurance companies under the health care law.

Republican Rep. Jim Jordan, chairman of the House Oversight subcommittee on Economic Growth, Job Creation and Regulatory Affairs, charged that top insurers have told the subcommittee that they’re expecting to be paid between $500 million and $1 billion out of taxpayer funding. (RELATED: Obama Admin Rule Opens Door To Insurance Company Bailout) 

The health care law contains three risk aversion measures to keep Obamacare insurers from hiking premiums in the first several years of the health care law, which many expected (correctly, according to early reports) to bring in an influx of sicker-than-average patients.

“The American people have a right to know how much these backdoor bailouts will cost,” Rep. Jordan said. “While I have great respect for the analysts at the CBO, their findings in this area did not square with the evidence presented by numerous health policy experts.”

Official estimates on the cost of the measures are ever-changing. In February, the Congressional Budget Office estimated that the risk aversion measures would actually save taxpayers $8 billion, but by April, the CBO revised its projection, saying the taxpayers will likely break even. The budget office has since ceased to measure the cost of the risk aversion measures, but the panel’s experts believe it will end up actually costing taxpayers.

Seth Chandler, a University of Houston law professor and expert in insurance law and mathematics, called the CBO’s analyses into question.

“The CBO simply capitulated to the executive branch that it would balance risk corridor books by paying off any deficiency with proceeds with what it hoped would be the following year’s surplus,” Chandler told the subcommittee, saying the method doesn’t make “mathematical sense.”

Instead, Chandler thinks the risk aversion mechanisms will most likely end up costing taxpayers — how much,  depending on a number of factors. But he projects that the fall through could cost between $500 million and $1 billion of taxpayer funding, on top of redistributed funds between insurers.

Democrats on the committee said the programs should not be seen as a ‘bailout,’ calling the risk mitigation measures necessary to keep insurers in the market and somewhat side-stepping the issue by pointing out that a similar provision was included in Medicare Part D, which was approved by the George W. Bush administration.

Actuarial expert Cori Uccello also refused to call the programs a bailout, saying it was “too early to say” whether taxpayers will end up contributing to the funding program and arguing that the program gets at the issue of insurers trying to avoid sicker, high-cost patients by leveling the playing field, reducing price uncertainty and keeping premiums artificially lower.

But it’s possible that Congress may put a damper on the payments. Republican Senator Jeff Sessions, ranking member of the Senate Budget Committee, made an unusual appearance at the House hearing to discuss a recent Senate report that found that HHS doesn’t have the legal authority to make any of the payments without a Congressional appropriation.

All the risk corridor payments — whether the funds come from payments collected from insurers or actual taxpayer money — must be legally appropriated by Congress before HHS can begin doling out the funds. But the Affordable Care Act doesn’t appropriate the funds — it left the decision to a new Congress, Sessions told the subcommittee.

Republicans’ united front against the Obama administration’s ability to unilaterally make the insurer payments without an appropriation could spark another significant Obamacare battle later in the year.

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