May 06, 2016

Freedom Partners Applauds Upton and Brady For Obamacare Bailout Subpoena

Post by Derek Yale


Arlington, VA 
— Yesterday two House Committees led by Reps. Fred Upton (R-MI) and Kevin Brady (R-TX) issued a new subpoena to the Department of Health and Human Services (HHS) regarding a $5 billion bailout occurring through the Affordable Care Act’s cost-sharing reduction program.

Prior to this subpoena, Congress had repeatedly requested documentation for the unauthorized payments being made through the cost-sharing reduction program which has been denied appropriations. 

These cost-sharing reduction payments are just one of three Obamacare bailouts which are currently occurring or may occur under the Affordable Care Act. The Center for Medicare and Medicaid Services (CMS) recently revealed that it has been improperly withholding $4 billion from the Department of the Treasury with the intent of bailing out insurance companies through the Affordable Care Act’s reinsurance program. Additionally, while the unpopular risk corridor program — which would have directly provided taxpayer payments to bail out insurance companies losing money off of Obamacare — has been blocked by Congress since 2015, the Administration is currently seeking to use the courts to implement this bailout. 

Freedom Partners Senior Policy Advisor Nathan Nascimento issued the following statement:

“We applaud Reps. Upton and Brady for demanding answers from HHS over a $5 billion Obamacare bailout happening through the cost-sharing reduction program. Unfortunately, these payments are just one symptom of an alarming pattern of bailouts for insurance companies happening under the failing Affordable Care Act. This Administration is willfully prioritizing the needs of insurance companies over the needs of American taxpayers already suffering under this law. Not only do Americans deserve immediate answers, we deserve the billions of dollars this Administration owes us for the Obamacare bailout we’re unwillingly funding.”

Obamacare Bailout #1: $5 Billion In “Cost-Sharing Reduction” Payments To Insurance Companies

The Cost-Sharing Reduction (CSR) Program Was Intended To Pay Insurers Back For Providing Low-Cost Plans. “Cost-sharing assistance – the cost-sharing reduction (CSR) program – provides assistance to both individuals purchasing insurance on the exchanges in the form of deductibles, coinsurance, and copayments; and through payments to insurance companies providing these plans(Annie L. Mach and Namrata K. Uberoi, “Overview of Private Health Insurance Provisions in the Patient Protection and Affordable Care Act (ACA), Report #R43854, Congressional Research Service, 4/5/16)

The Obama Administration Requested That $5 Billion Taxpayer Dollars Go To CSR — The Request Was Denied By Congress. “In April 2013, the Obama administration requested more than $5 billion to be appropriated by Congress to fund these CSR program payments to insurers – the request was denied and never fulfilled.” (Letter to Health and Human Services (HHS) Secretary Burwell from Chairman Paul Ryan and Chairman Fred Upton, 2/3/15)

Signs Emerged That HHS Was Making The $5 Billion Payments Unlawfully. “In May 2014, HHS Secretary Burwell wrote that HHS was making CSR program payments “from the same account from which the premium tax credit portion of the advance payments are made.” (Letter to Health and Human Services (HHS) Secretary Burwell from Chairman Paul Ryan and Chairman Fred Upton, 2/3/15)

2014: House Republicans File A Lawsuit Over These “Illegal” And “Unconstitutional” Payments. “In November 2014, House Republicans filed a lawsuit against President Obama and his administration over two ObamaCare provisions, including the CSR program payments to insurance companies expected to total more than $170 billion over the next 10 years, asserting that these payments were illegal and unconstitutional since no money had been appropriated for them.” (Christine Mai-Due, “House Republicans sue President Obama over healthcare law,” Los Angeles Times, 11/21/14)

2015: Congress Launched Its First Investigation Into The CSR Payments. “February 2015, House Committee on Energy and Commerce Chairman Fred Upton and House Committee on Ways and Means Chairman Paul Ryan officially launched an investigation into the CSR program, requesting documents from HHS Secretary Burwell and Treasury Secretary Lew by February 17, 2015, saying that the ‘Obama administration has denied repeated requests for information and documents.’” (Press Release, House E&C, 5/4/16)

By Early 2016, Four Separate Requests For Documentation Over The CSR Payments Had Been Made By The House Ways and Means And Energy and Commerce Committees. (Press Release, E&C, 1/20/16 and Press Release, House E&C, 5/4/16)

Questions Unanswered By HHS, Concerns Remained About The Potentially Unlawful CSR Payments, Totaling $5 Billion. “They are concerned that HHS is ‘paying subsidies to insurance companies under Section 1402 without a legal appropriation from Congress’ totaling more than $5 billion, to date, which the nonpartisan Congressional Budget Office (CBO) estimated to amount to $170 billion over the next 10 years.” (Seth Chandler, “Why the House lawsuit over cost sharing reductions might win but won’t kill Obamacare,” Forbes, 1/14/16)

This Week, House Republicans Subpoenaed HHS Over The CSR Bailout. “House Republicans are subpoenaing documents related to ObamaCare payments that they say break the law. Two House committees issued the subpoenas on Wednesday, saying the administration has refused to comply with document requests for over a year. The administration counters that the matter is part of an ongoing lawsuit. ‘Now, 15 months after our first request, we still don’t have the most basic information about the $5 billion in unlawful payments to insurance companies,’ Reps. Fred Upton (R-Mich.) and Kevin Brady (R-Texas), the chairmen of two committees, said in a statement.” (Peter Sullivan, The HillMay 4, 2016)

Obamacare Bailout #2: Unpopular “Risk Corridor” Payments To Insurance Companies

The Obama Administration Created Risk Corridor Payments To Help Insurance Companies Mitigate The Risks Created By The Affordable Care Act. “The ACA created three risk mitigation programs—reinsurance, risk corridors, and risk adjustment—to help health insurance issuers adjust to the reformed private health insurance landscape, particularly the new entrants to the market and the changes to how issuers set premiums.” (Annie L. Mach and Namrata K. Uberoi, “Overview of Private Health Insurance Provisions in the Patient Protection and Affordable Care Act (ACA), Report #R43854, Congressional Research Service, 4/5/16)

Risk Corridors Shift The Risk Of Obamacare Onto The Backs Of Taxpayers. “Obamacare’s risk-corridor program is a way of shifting risk from insurance companies to taxpayers—of putting the latter on the hook if the former lose money. (Bill Kristol and Jeffery H. Anderson, “A no-brainer for the House GOP,” The Weekly Standard, 7/28/14)

Since 2015, Congress Has Prevented These Unpopular Payments From Being Made To Insurers. “Such debates have resulted in new provisions within the bill, such as those from FY2015 and FY2016 that prevent certain funds from being used to make risk corridor payments associated with health insurance exchanges.” (Karen E. Lynch and Jessica Tollestrup, “FY2017 Labor-HHS-Education Appropriations: Status and Issues,” Report #44478, CRS, 4/26/16)

Congress Has Prohibited These Payments From Being Made In 2017. (Karen E. Lynch and Jessica Tollestrup, “FY2017 Labor-HHS-Education Appropriations: Status and Issues,” Report #44478, CRS, 4/26/16)

Now, The Obama Administration Is Telling Insurers To Sue The Government For This Bailout Money. “The Obama administration issued a memorandum stating that – contrary to the clear intent of the duly-enacted funding restriction, the administration’s repeated promises, and HHS’s own regulation – they considered insurance companies to be legally owed bailout payments from the risk corridor program far in excess of program revenues….Taking the hint, the insurance industry filed the $5 billion class action lawsuit Health Republic Insurance Company v. the United States that is now pending in the U.S. Court of Federal Claims.” (Phil Kerpen, “Congress Must Stop Obamacare Bailout Scheme — Again,” Town Hall, May 4, 2016) 

Obamacare Bailout #3: $4 Billion In “Reinsurance” Payments To Insurance Companies

The Obama Administration Created The Reinsurance Program To Help Insurance Companies Mitigate The Risks Created By The Affordable Care Act. “The ACA created three risk mitigation programs—reinsurance, risk corridors, and risk adjustment—to help health insurance issuers adjust to the reformed private health insurance landscape, particularly the new entrants to the market and the changes to how issuers set premiums.” (Annie L. Mach and Namrata K. Uberoi, “Overview of Private Health Insurance Provisions in the Patient Protection and Affordable Care Act (ACA), Report #R43854, Congressional Research Service, 4/5/16)

CMS Recently Revealed That $4 Billion Are Being Diverted from the Treasury and Allocated to Insurers Through The Reinsurance Program. “For the 2015 benefit year, HHS anticipates that it will have $7.7 billion in reinsurance contributions to be used for reinsurance payments. Based on submissions from contributing entities for the 2015 benefit year as of February 3, 2016, HHS estimates that it will collect a total of $6.5 billion. Of this amount: … $500 million will be used for reinsurance payments for the 2015 benefit year, and $500 million will be allocated on a pro rata basis for program administration and to the General Fund of the U.S. Treasury.” (Centers for Medicare and Medicaid Services, “The Transitional Reinsurance Program’s Contribution Collections for the 2015 Benefit Year,” Department of Health and Human Services, 2/12/16)

But Under Obamacare Itself, That Money Is Specifically Designated For The Treasury Department. “This money shall be deposited into the general fund of the Treasury of the United States and may not be used for the [reinsurance] program established under this section.” (Patient Protection and Affordable Care Act, 42 U.S.C. § 18001 et seq. (2010))