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HHS moving forward with risk corridor payments despite GAO's view

Congress must explicitly appropriate funds to pay for the risk corridors program that is designed to protect insurers from big losses in the state and federal exchanges, according to legal opinion issued by the Government Accountability Office.

“The making of an appropriation must be expressly stated in law,” the nonpartisan watchdog agency wrote. “It is not enough for a statute to simply require an agency to make a payment.”

In January, the Congressional Research Service reached a similar conclusion (PDF) about the program.

So is the risk corridors program in jeopardy? That seems extremely unlikely.

The program is seen as a crucial protection that helped entice insurers into the fledgling marketplaces even though they had little knowledge about who would purchase their plans and how much their medical care would cost. Health plans that attract a disproportionately unhealthy population will receive payments from HHS to mitigate their losses, while plans that enroll less-expensive customers will be required to make payments to the federal agency.

The risk corridors program runs through 2016. The Obama administration has indicated the program will be budget neutral. HHS has not made any payments to insurers so far, but it plans to do so in the fiscal year that starts Oct. 1.

In response to the GAO inquiry, HHS indicated that the agency already has the authority to fund the program under existing appropriations. “The CMS PM appropriation permits HHS to collect, retain, obligate, and expend the user fees in a manner consistent with section 1342 (of the ACA),” wrote William Schultz, the agency's general counsel.

Republicans decried that stance as another example of the Obama administration's abuse of executive power. “Chalk up another executive fiat for this imperial presidency,” said Rep. Fred Upton (R-Mich.), chairman of the Energy and Commerce Committee, in a statement at the time.

But Loren Adler, research director for the Committee for a Responsible Federal Budget, points out that a similar risk-protection program in the Medicare prescription drug program does not receive an explicit annual appropriation, yet has not been challenged. He thinks that makes it highly unlikely that HHS will be deterred from making the payments to insurers under the risk corridors program.

“This is a pretty big deal to insurers,” Adler said. “I can't imagine that it will let a CRS or GAO opinion stop them from doing that.”

Follow Paul Demko on Twitter: @MHpdemko


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