Obamacare's Insurers Are Receiving a Well-Deserved Lump of Coal

It’s understandable that some big businesses believe Congress to be their very own Santa Claus. The legislature has been known to hand out preferential treatment, favors and earmarks at a speed that rivals St. Nicholas.

But this year is different, at least in the realm of health care. The same insurance industry that was complicit in crafting the calamitous Affordable Care Act (ACA), commonly known as Obamacare, has increasingly been seeking shelter from it. But Santa must have checked his list twice, because the industry is receiving a well-deserved lump of coal in its stocking this year, rather than more taxpayer largesse.

The CRomnibus spending bill, which was recently passed in the lame-duck Congress, protects federal taxpayers from a ​blank​-check bailout of the same health-care insurance providers that were complicit in passing the president’s health-insurance overhaul.

A little-known, but important, portion of the ACA includes provisions to pay insurers for their financial losses in the Obamacare exchanges. Known as “risk-corridor payments,” money is pooled from each insurer and added to revenue from a new Obamacare tax on health-insurance plans, which are costs that are passed on to consumers in the form of higher health-insurance premiums.

The issue at hand was whether these payments were supposed to be budget-neutral – limited to the amount of money available from insurers and the health plan tax revenue pool – or whether taxpayers could be on the hook for a blank check to the insurance industry if an insurance company’s losses were higher than originally predicted.

It should come as no surprise that the insurers had the blank-check bailout on their Christmas wish list. But the CRomnibus codifies that the ACA payments to insurers are budget-neutral – not the $47 billion or more that insurers were hoping for.

As it turns out, the insurers were already hedging their bets on the president’s health-insurance overhaul. Insurers participating in the federal health exchange did so this year only with the inclusion of an “escape hatch” protecting them from the possibility that the Supreme Court rules premium subsidies to insurers illegal in the vast majority of states. And that possibility is very real.

At issue is what the plain text of Section 1401 of the ACA means. Even though the text of the law states that the subsidies are available “through an Exchange established by the State under 1311 of the Patient Protection and Affordable Care Act,” the IRS, without congressional authorization, allowed federal subsidies to flow into states participating in the federal exchange when it implemented the law.

There are currently four legal challenges based on this issue. The Supreme Court has agreed to hear the King v. Burwell challenge, where the 4th U.S. Circuit Court of Appeals upheld the legality of the IRS subsidies.

If the Supreme Court rules in the plaintiffs’ favor, making the IRS subsidies illegal, the subsidies would end in the 34 states that have not yet established state-funded health insurance exchanges. Thus, the escape-hatch provision for insurers.

Unfortunately, Americans have not had the same ability to insulate themselves from the effects of the ACA. There is no escape hatch from increasing premiums, cancelled policies, not being able to keep providers, lost work hours and harsh penalties. That is why codifying the insurance bailout as budget-neutral is such an important gift to taxpayers.

It is also ​an​ important first step in dismantling the president's health-insurance overhaul. These lawmakers deserve recognition for playing Scrooge to the insurance industry.

Naomi Lopez Bauman is the director of health policy at the Illinois Policy Institute (illinoispolicy.org). She can be followed at @LopezBauman.

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