A federal judge has dismissed an Illinois health insurer’s lawsuit against the U.S. Department of Health and Human Services (HHS) for $73 million in missed Obamacare payments.
The sum, demanded by Land of Lincoln Mutual Health Insurance Company, is a fraction of the $8.3 billion insurers have asked HHS to pay through the Affordable Care Act’s (ACA) risk-corridor program to cover losses on Obamacare plans in 2014 and 2015. The program redistributes earnings of profitable insurers participating in the Obamacare exchanges to unprofitable insurers.
Because Congress prohibited HHS from using non-risk-corridor funds to cover the program’s losses in 2014, HHS paid unprofitable insurers 12.6 percent of the reimbursements they requested that year.
HHS signaled the Obama administration’s willingness to pay insurers most of the risk-corridor payments they have requested in the form of settlements with insurers suing HHS, according to a September 9, 2016, memo by Andy Slavitt, acting administrator of the Centers for Medicare and Medicaid Services, which HHS oversees.
Federal Judge Charles Lettow dismissed Land of Lincoln’s complaint on November 10, 2016. The company terminated its insurance plans on October 1, 2016.
Costs ‘Created by Obamacare’
Chris Jacobs, founder of Juniper Research Group, says the multi-billion-dollar losses stem from selling insurance through Obamacare exchanges.
“These costs were created by Obamacare,” Jacobs said. “Most of [these] insurance companies expect to write off the claims and know they are not going to receive payment. I think insurers made about $15 billion in 2015, but almost all of them lost money selling Obamacare.”
The ruling against Land of Lincoln could bode ill for other insurers making similar arguments in court against HHS for risk-corridor payments, Jacobs says.
“This was the first risk-corridor suit to come to judgment, to be heard by the court on its merits,” Jacobs said. “The Obama administration has been arguing that these lawsuits are not right and that the insurers must wait three years for the risk corridor program to be completed to see if there was any money outstanding. The court ruled that the insurers are not owed any money.”
Busting the Bailouts
Jacobs says Congress protected taxpayers from footing the bill for an Obamacare program that would have paid for itself, were it successful.
“In other words, Congress decided that taxpayers will not bail out someone else’s bad decisions,” Jacobs said. “Most insurers have suffered major losses from Obamacare. The Obama administration has made decisions unilaterally that have harmed insurers and promised to bail them out using risk corridor.”
Jacobs says the Obama administration is trying to circumvent the law by paying off insurers with the Judgment Fund, which the Department of Justice uses to pay for lawsuits.
“This particular lawsuit came about because insurers want to get their money, and the Obama administration sees this as a way to pay insurers through the Judgment Fund rather than through the Department of Health and Human Services,” Jacobs said. “Essentially, it wants to pay insurers through the back door because Congress closed the front door.”
Josh Blackman, an associate professor of law at the South Texas College of Law in Houston, says the Judgment Fund ensures the federal government has liquid capital for paying costs incurred by losing a lawsuit.
“Prior to the Judgment Fund, Congress would have to actually pass a bill to fund every case, which was time-consuming,” Josh Blackman said. “So they created this bottomless fund that could be used to fund lawsuits.”
Using the Judgment Fund to pay off insurers for missed risk-corridor payments would be an abuse by HHS, says Blackman, author of Unraveled: Obamacare, Religious Liberty, and Executive Power.
“This is problematic because you can pay for these judgments even when money has not already been appropriated,” Blackman said. “For example, Congress chose not to fund the risk corridor suits, but using money from the Judgment Fund to pay these insurers would be a way for the federal government to step around that.”
ACA mandates stipulating what health care services insurance plans must cover prevents insurers from developing cost-effective plans appealing to uninsured individuals, Jacobs says.
“Give insurance carriers the freedom to innovate and come up with plans rather than being prescriptive and restrictive, as insurers have to be under Obamacare,” Jacobs said. “Individuals are forced to buy plans they may not want, or [they] may not need all of the coverage.”
In a free market, taxpayer bailouts of insurers would not happen because insurers would not persist in offering unwanted products people are required to buy, Jacobs says.
“The answer is to give them more flexibility,” Jacobs said. “[This] would particularly help young and healthy people. We wouldn’t need all of these bailout pools if there was a product that young and healthy people were interested in buying.”
Jordan Finney ([email protected]) writes from Boise, Idaho.
Michael T. Hamilton and Justin Haskins, “To Save Obamacare, the President Plots a Massive Bailout of Health Insurers,” National Review, November 14, 2016.
Michael T. Hamilton, “Josh Blackman: Obamacare Unravels with Executive Power’s Abuses Against Constitution,” Health Care News Podcast, The Heartland Institute, November 9, 2016.
Jordan Finney, “HHS Floats Move to Tap Lawsuit Fund to Bail Out Obamacare Insurers,” Health Care News, The Heartland Institute, October 26, 2016.
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