Hi Chet –
After speak­ing at length today with Jeanne and our oth­er pol­i­cy folks, I do not think I have any more to add. They seem to have giv­en you 80 per­cent of what you request­ed and I am not in a posi­tion to sec­ond guess there [sic] analy­sis.
Sin­cere­ly,
Valerie

“Valerie” would be Valerie Jar­rett, one of Pres­i­dent Obama’s clos­est advis­ers. “Chet” would be Chet Bur­rell, CEO of Care­First Blue Cross. In the April 15 email, Jar­rett advised the insur­ance exec­u­tive that he would have to live with 80 per­cent of what his indus­try asked the White House for.

A month lat­er, the Admin­is­tra­tion relent­ed and gave the indus­try 100 per­cent of what it asked for – a reg­u­la­tion that will involve the give­away of an addi­tion­al $1 bil­lion in tax­pay­er funds to insur­ers par­tic­i­pat­ing in the Oba­macare exchanges.

If the Speak­er intends to file a law­suit against the Admin­is­tra­tion for abuse of pow­er, as a res­o­lu­tion adopt­ed last evening by the House autho­rizes him to do, he should sue over this.

Obamacare’s imple­men­ta­tion has large­ly been unteth­ered from the text of the law. Key pro­vi­sions have been waived, delayed, or direct­ly con­tra­vened. The Admin­is­tra­tion is levy­ing tax penal­ties on unin­sured indi­vid­u­als, but not on cor­po­ra­tions that fail to pro­vide cov­er­age to their work­ers. It is award­ing sub­si­dies to peo­ple who mis­rep­re­sent their income and legal sta­tus, while threat­en­ing com­pa­nies that object on reli­gious grounds to cer­tain forms of birth con­trol with fines of $36,500 per work­er per year.

But for sheer impro­vi­sa­tion, noth­ing match­es its deter­mi­na­tion to pad the bot­tom lines of insur­ance com­pa­nies. The Administration’s under­stand­ing of its author­i­ty to make these pay­ments has repeat­ed­ly shift­ed, chang­ing with each reg­u­la­to­ry iter­a­tion and, more recent­ly, with each email exchange with insur­ance executives.

At issue is a cor­po­rate wel­fare pay­ment called “risk cor­ri­dors.” Under this Oba­macare pro­vi­sion (sec­tion 1342), insur­ers whose prof­its exceed expec­ta­tions sub­si­dize their com­peti­tors whose mar­gins dis­ap­point. In the­o­ry, the fed­er­al government’s only role is to trans­fer the “excess prof­its” of suc­cess­ful insur­ers to com­pa­nies that suf­fered “excess loss­es.” Prop­er­ly enforced, it should not cost tax­pay­ers a dime. It should be bud­get neutral.

The insur­ance indus­try has urged a dif­fer­ent inter­pre­ta­tion, one that would enti­tle com­pa­nies to pay­ments if they end up dis­burs­ing more in claims than they had antic­i­pat­ed, even if that required tax­pay­ers, rather than oth­er insur­ers, to finance the pay­ments. Until ear­li­er this year, the agency agreed with insur­ers, view­ing the risk cor­ri­dor pro­gram as a cor­po­rate enti­tle­ment. Tax­pay­ers would ease the pain of com­pa­nies that suf­fered loss­es or earned unsat­is­fy­ing profits.

But the Admin­is­tra­tion had a change of heart. Sev­er­al changes, actu­al­ly. A report issued ear­li­er this week by the House Over­sight and Gov­ern­ment Reform Com­mit­tee recounts the back-and-forth that occurred this past spring:

In March 2014, after the Admin­is­tra­tion sug­gest­ed that it would imple­ment the Risk Cor­ri­dor pro­gram in a bud­get neu­tral man­ner, insur­ers and their lob­by­ists threat­ened that forc­ing bud­get neu­tral­i­ty on the pro­gram would mean much high­er pre­mi­ums in exchange plans in 2015. In ear­ly April 2014, the Admin­is­tra­tion attempt­ed to clar­i­fy the risk cor­ri­dor bud­get neu­tral­i­ty with Valerie Jar­rett com­mu­ni­cat­ing to an insur­ance com­pa­ny CEO that the Admin­is­tra­tion had deliv­ered 80 per­cent of what the insur­ers sought. How­ev­er, the Admin­is­tra­tion was not fin­ished mak­ing the risk cor­ri­dor pro­gram more gen­er­ous to insur­ers and more dan­ger­ous to tax­pay­ers. In May 2014, the Admin­is­tra­tion adjust­ed the risk cor­ri­dor for­mu­la to increase the chances that insur­ers would receive mon­ey through the pro­gram and to increase the amount of mon­ey that insur­ers would receive (p. 31).

Insur­ers expect to receive a lot of mon­ey from the pro­gram as the result of the Admin­is­tra­tion’s lat­est pol­i­cy pro­nounce­ment: $1 bil­lion by the committee’s esti­mate. That esti­mate is based on the panel’s sur­vey of 15 of the largest com­pa­nies that sell poli­cies through the Oba­macare exchanges. The sur­vey found that 12 of the 15 expect to receive cor­po­rate wel­fare pay­ments through the risk cor­ri­dor pro­gram; just 1 expects to pay in. Insur­ers thus scored a crit­i­cal vic­to­ry when the Admin­is­tra­tion aban­doned its plan to oper­ate the risk cor­ri­dor pro­gram in a bud­get neu­tral way.

There’s just one prob­lem: HHS, accord­ing to the Con­gres­sion­al Research Ser­vice, has no legal author­i­ty to make any pay­ments to any insur­ance com­pa­nies under the risk cor­ri­dor pro­gram. Con­gress must appro­pri­ate the mon­ey. It has not done so and almost cer­tain­ly won’t.

But the lack of legal author­i­ty to spend mon­ey won’t deter the White House. They will spend it any­way. The House may at some point take up a bill (H.R. 4406) to pro­hib­it HHS from mak­ing risk cor­ri­dor pay­ments that exceed receipts. But even if they were to pass this sen­si­ble mea­sure, the Sen­ate would sure­ly kill it. And the mon­ey will sure­ly be spent.

There is but one path to pro­tect tax­pay­ers from an indus­try raid on the Trea­sury. We are gov­erned by a Con­sti­tu­tion, not by exec­u­tive caprice. The fact that an indus­try real­ly, real­ly wants $1 bil­lion and Valerie Jar­rett real­ly, real­ly wants to give it to them does not make the expen­di­ture constitutional.

The Con­sti­tu­tion, how­ev­er, is not self-enforc­ing. Con­gress in its cur­rent state of dys­func­tion can’t — or won’t — enforce it. That leaves only the courts. The Speak­er has been autho­rized (H. Res. 676)  to sue in fed­er­al court over “the fail­ure of the Pres­i­dent, the head of any depart­ment or agency, or any oth­er offi­cer or employ­ee of the exec­u­tive branch, to act in a man­ner con­sis­tent with that official’s duties under the Con­sti­tu­tion and laws of the Unit­ed States with respect to imple­men­ta­tion of any pro­vi­sion of the Patient Pro­tec­tion and Afford­able Care Act.”

Such a law­suit is hard­ly an ide­al solu­tion and it may prove futile, but it is the only one avail­able in the cir­cum­stances.  The House has giv­en the Speak­er the author­i­ty to sue.  He should use it to seek a court-ordered ban on these unlaw­ful cor­po­rate wel­fare payments.

Post­script: In argu­ing that pol­i­cy­mak­ers lack the legal author­i­ty to oper­ate the risk cor­ri­dor pro­gram as they evi­dent­ly intend to do, I am not sug­gest­ing that any of these indi­vid­u­als or any rep­re­sen­ta­tives of the insur­ance indus­try have behaved uneth­i­cal­ly. I know some of the White House staff that were engaged in these issues either per­son­al­ly or by rep­u­ta­tion and I believe them to be peo­ple of high char­ac­ter. Their appli­ca­tion of the law is mis­guid­ed; their moral pro­bity is not in question.