TO: Interested Parties
FROM: Executive Director Jeffrey Anderson
SUBJECT: Obamacare’s Risk-Corridor Slush Fund
What is it?
- Obamacare’s risk-corridor program is designed to redistribute money in the Obamacare exchanges, from health insurers who make money to those who lose money.
- It is part of Obamacare’s “Three R’s,” along with the risk-adjustment and reinsurance programs.
What’s the concern?
- President Obama is using the risk corridors as his personal slush fund.
- When Obama’s insurance-company allies balked at his refusal to execute Obamacare as written, he placated them by issuing a rules change to the risk-corridor program that the CBO says was worth $8 billion to insurers—the same amount that the Fortune 500 says the nation’s 10 largest health insurers made in combined profits in 2008, the year before Obama took office.
- Obamacare doesn’t require the risk corridors to be budget-neutral—so, if more insurers lose money than make money under Obamacare (a near-certainty), taxpayers will be on the hook.
- Whatever Medicare Part D’s merits, its risk corridors didn’t make taxpayers cover insurers’ losses.
An 80-10% issue?
- Polling by McLaughlin & Associates asked, “If private insurance companies lose money selling health insurance under Obamacare, should taxpayers help cover their losses?” By 81% to 10%, respondents said no. (The poll included 38% Democrats and 31% Republicans.)
Is President Obama violating the separation of powers?
- Obama lacks legal authority to make risk-corridor payments even if they are budget-neutral. CRS says agencies are prohibited “from making payments in the absence of a valid appropria-tion”; that Obamacare’s risk-corridor section “would not appear to constitute an appropriation”; that agencies “may not create a revolving fund absent specific authorizing legislation,” and that “there does not appear to be sufficient statutory language to create a revolving fund.”
- Senator Jeff Sessions recently testified that the “legislation establishing Medicare Part D included a mandatory appropriation,” whereas Obamacare “contains no such language.”
- Now Obama says “authorized user fees”—effectively a new tax on most Americans’ health plans, which he has no authority to impose under the law—will be used to fund the risk corridors.
Would Obamacare premiums rise?
- Liberals say that making the risk corridors budget-neutral by law will lead to higher premiums in the Obamacare exchanges. But that would be true only if, in the absence of such legislation, insurers’ losses would have been covered by taxpayers. If the risk corridors were really going to be budget-neutral, as Obama has said and the CBO (taking his word for it) has echoed, such a law wouldn’t raise insurance premiums in the exchanges one bit.
- The CBO first scored the risk corridors as providing an $8 billion surplus. But after Obama’s payoff to insurers, the CBO now scores them as budget-neutral. This legislation would merely require such budget-neutrality as a matter of law, rather than as a matter of executive whim.
- Such legislation would fight corporate welfare, help Main St. Americans, and thwart Obamacare.