Senators Press for Answers from DOJ, HHS on Potential Multimillion Dollar Obamacare Insurance Bailout

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Wednesday, September 28, 2016

Senators Press for Answers from DOJ, HHS on Potential Multimillion Dollar Obamacare Insurance Bailout

WASHINGTON--U.S. Senators John Barrasso (R-WY), Mike Lee (R-UT), Marco Rubio (R-FL), and Ben Sasse (R-NE) pressed the Obama administration about its potential multimillion-dollar bailout of select insurance companies through Obamacare's Risk Corridors Program (RCP). In a letter to Attorney General Loretta Lynch, Health and Human Services Secretary Sylvia Burwell and Centers for Medicare & Medicaid Services Acting Administrator Andy Slavitt, the senators question the legality and the availability of funds to settle claims for payment under the RCP.

The letter states: "The health care law contained three risk mitigation programs, one of which is the temporary Risk Corridor Program. This program was originally intended to be implemented in a budget neutral manner. This intention was confirmed when Congress passed, with Presidential approval, two separate provisions of appropriations law confirming its budget neutrality. It now appears the Administration is preparing to circumvent these actions."

The letter discusses the use of the judgement fund to resolve claims filed against the government for non-payment under the RCP, concluding that "it would be inappropriate for the Judgement Fund to be used to settle any litigation stemming from the risk corridor program. Accordingly, we write to ascertain specifically how CMS intends to go about seeking 'resolution of those claims' so that federal law is not violated."

In addition to the letter, Senator Barrasso added: "Obamacare continues to fail American families who are facing premium increases and fewer choices," said Barrasso. "Instead of admitting the collapse of Obamacare, the administration now appears to be pursuing a massive and illegal bailout."

Full text of the letter is below:

Sept. 27, 2016

Dear Attorney General Lynch, Secretary Burwell, and Administrator Slavitt,

We write to express our grave concerns regarding the potential participation of your departments in a multibillion dollar bailout of select health insurance companies through the Affordable Care Act's Risk Corridors Program (RCP).[1] We also seek an explanation regarding your understanding of the availability of funds to settle claims for payment under the RCP.

The health care law contained three risk mitigation programs, one of which is the temporary Risk Corridor Program. This program was originally intended to be implemented in a budget neutral manner. This intention was confirmed when Congress passed, with Presidential approval, two separate provisions of appropriations law confirming its budget neutrality. It now appears the Administration is preparing to circumvent these actions.

In a November 19, 2015, memorandum addressing the Risk Corridors, the Centers for Medicare & Medicaid Services (CMS) stated that "the Affordable Care Act requires the Secretary to make full payments to issuers" and that "full payment is required" pursuant to the RCP.[2] CMS also stated that if the program experienced continued shortfalls, the Department of Health and Human Services (HHS) would "explore other sources of funding for risk corridors payments, subject to the availability of appropriations."[3]

In a September 9, 2016, memorandum, CMS once again stated that "the Affordable Care Act requires the Secretary to make full payments to issuers" and that HHS would "record risk corridors payments due as an obligation of the United States Government for which full payment is required."[4] This memorandum also repeated that "in the event of a shortfall," HHS would "explore other sources of funding for risk corridors payments, subject to the availability of appropriations."[5]

The memorandum then went on to address recent suits filed by insurance issuers in federal court regarding non-payment under the RCP, expressing that, "as in all cases where there is litigation risk, we are open to discussing resolution of those claims," and that "[w]e are willing to begin such discussions at any time."[6]

If "resolution of those claims" refers to settlement with payment from the Judgment Fund, 31 U.S.C. S. 1304, any such payment would be illegal. The Judgment Fund is unavailable for payments if the award is otherwise provided for, by appropriation or statute. As the Congressional Research Service concluded in a January, 2015, memorandum requested by Senator Rubio, "[b]ased on the existence of an appropriation for the risk corridor payments"--namely, the provision of the Affordable Care Act creating the RCP and subsequent measures directing how payments shall be made pursuant to that provision--"it appears that Congress would have 'otherwise provided for' any judgments awarding payments under that program to a plaintiff. As a result, the Judgment Fund would not appear to be available to pay for such judgments under current law."[7]

Finally, CRS also stated in a memorandum requested by Senator Barrasso that even if the plaintiffs were successful in their lawsuits, they would not be able to recover any additional funds, until insurance companies paid additional money into the program or Congress appropriated additional funds. Specifically, CRS stated, "it appears that any payment to satisfy a judgment secured by plaintiffs seeking recovery of amounts owed under the risk corridors program would need to wait until such funds were made available through future program receipts by CMS or through additional funds appropriated by Congress."

Consequently, it would be inappropriate for the Judgement Fund to be used to settle any litigation stemming from the risk corridor program. Accordingly, we write to ascertain specifically how CMS intends to go about seeking "resolution of those claims" so that federal law is not violated.

1. Does CMS believe that Congress has appropriated funds for payments to be made under the Risk Corridors Program, either pursuant to 42 U.S.C. S. 18062 or in resolution of a claim filed against the government for non-payment under the RCP?

1a. If not, how does CMS intend to make "resolution of th[e] claims" in the ongoing litigation matter?

1b. If so, what does CMS believe constitutes an appropriation from Congress to make payments, either pursuant to 42 U.S.C. S. 18062 or in resolution of a claim filed against the government for non-payment under the RCP?

2. Does CMS believe that the Consolidated Appropriations Act, 2016, Pub. L. No. 114-113, Div. H S. 225, 129 Stat. 2242, 2624, which explicitly prohibits payments under the RCP absent sufficient revenue generated from the RCP itself,[8] nevertheless still allows CMS to make payments to insurers seeking reimbursement pursuant to 42 U.S.C. S. 18062 despite RCP revenue shortfalls, either overtly or in resolution of claims against the government for non-payment?

2a. If so, by what authority and based on what appropriation does CMS believe it may make payments to insurers seeking reimbursement pursuant to 42 U.S.C. S. 18062 despite RCP revenue shortfalls, either overtly or in resolution of claims against the government for non-payment?

Thank you for your attention to this matter.

[1] 42 U.S.C. S. 18062.

[2] See Center for Medicare & Medicaid Servs., Risk Corridors Payments for the 2014 Benefit Year (Nov. 19, 2015), available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/ Downloads/RCObligation Guidance11-19-15.pdf.

[3] Id.

[4]See Center for Medicare & Medicaid Servs., Risk Corridors Payments for 2015 (Sept. 9, 2016), available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/Risk-Corridors-for-2015-FINAL.PDF.

[5] Id.

[6] Id.

[7] See Memorandum from Legislative Att'ys, Am. Law Div., Cong. Research Serv. to Senator Marco Rubio at 5 (Jan. 5, 2016), available at http://www.rubio.senate.gov/public/cache/files/1dc92ef8-c340-4cfd-95c0-67369a557f1e/2AA5EF8F125279800BFABC8B8BA37072.05.24.2016-crs-rubio-memo-risk-corridors-1-5-16-1-redacted.pdf.

[8] See Consolidated Appropriations Act, 2016, Pub. L. No. 114-113, Div. H S. 225, 129 Stat. 2242, 2624 (2016) ("None of the funds made available by this Act from the Federal Hospital Insurance Trust Fund or the Federal Supplemental Medical Insurance Trust Fund, or transferred from other accounts funded by this Act to the 'Centers for Medicare and Medicaid Services--Program Management' account, may be used for payments under section 1342(b)(1) of Public Law 111-148 (relating to risk corridors).").

Laura Mengelkamp, 202-224-0856 (Barrasso)

Emily Long, 202-224-3904 (Lee)

Matt Wolking, 202-224-3041 (Rubio)

James Wegmann, 202.768.2805 (Sasse)