GAO: Obama Administration Can’t Bail Out Insurers Without Congressional Authorization

October 7th, 2014

Earlier this week, the GAO released a legal opinion indicating that the Obama Administration cannot unilaterally bail out insurance companies, without statutes. Philip Klein reports:

In February, Sen. Jeff Sessions, R-Ala., and House Energy and Commerce Committee Rep. Fred Upton, R-Mich., sought clarification from the GAO as to whether the Obama administration even had the authority to use the general pot of money sent to the Centers for Medicare and Medicaid Services (the agency implementing the program for HHS) through the regular budget process to supplement any shortfall from the risk corridors program. On Tuesday, GAO responded that the administration does not possess that authority, and it requires Congressional cooperation.

More specifically, the legal opinion said that for the administration to dip into general CMS funds, whatever language Congress adopts in future appropriations to CMS must be the same as the language that was adopted for the 2014 fiscal year ending Sept. 30. That language enabled CMS to use appropriations for “other responsibilities” of CMS, which GAO said could include risk corridor payments.

In practice, what this means is that if Congress passes more restrictive language going forward, lawmakers could effectively block any risk corridor payments to insurers that exceed the money collected through the program from other insurers. Earlier this year, the Obama administration proposed making sure that the risk corridor program was budget-neutral (i.e. that payments were only made based on what was collected), and insurers mounted an aggressive lobbying campaignwarning that this would drive up premiums. In response, CMS issued revised guidance promising insurers that if the pool of money were insufficient to cover insurer losses, the agency would find “other sources of funding for the risk corridors payments, subject to the availability of appropriations.”