There are few more wasteful and counterproductive endeavors on Capitol Hill than the Republican bloc’s efforts to undermine the Affordable Care Act.
No, we’re not talking about the more than 60 times the GOP voted to repeal all or part of the law. We’re talking about its efforts to block funding for essential provisions of Obamacare designed to help patients and insurance customers. Two lawsuits point to how the cost of these efforts is destined to trickle down to innocent consumers.
In a case filed Tuesday in Pittsburgh, health insurer Highmark is suing the government for $223 million it’s owed under the ACA but that was blocked by the Republican Congress. The other lawsuit was filed in February by an Oregon health co-op that was forced out of business by the same congressional action, throwing the coverage of thousands of customers into doubt.
The right question isn’t whether health plans will get paid. It’s when.
More such lawsuits are lining up in the wings. Experts believe they’ll be successful, and the health plans will get their money. The millions of dollars wasted by the insurers in filing and pursuing these entirely unnecessary lawsuits, however, will end up in customers’ premiums.
Two provisions have been the main targets of the GOP funding blockage. One is the “risk corridor” program, which was undermined by Sen. Marco Rubio (R-Fla.) and his cronies. We covered that here. The second involves cost-sharing subsidies for low-income families, those with incomes below 250% of the federal poverty level.
Let’s start there.
Under the ACA, these families are entitled to reductions in deductibles, co-pays and other out -of-pocket charges, in addition to premium subsidies. These are the subject of a lawsuit filed by House Republicans asserting that they’re illegal because the law doesn’t specifically provide funding for them, and the House has refused to appropriate the money. The law says the reductions are to be provided by the families’ health plans, which then are to get reimbursed by the government.
Federal Judge Rosemary Collyer decided last year that the House had standing to sue the White House over that and other issues, but she’s widely expected to get overruled. In the meantime, she ruled last week that the cost-sharing reductions were indeed illegal.
There’s some learned disagreement about what the costs would be if Collyer’s judgment in House v. Burwell is upheld, and how they would be apportioned. The Urban Institute assumed that insurers still required to deliver the cost-sharing reductions but deprived of reimbursements would build their costs into premiums, especially for ACA benchmark silver plans. These would increase $1,040 per person on average, the study projected. The increase in rates would drive 400,000 people out of the insurance market and cost the government $47 billion over 10 years.
On the surface, this looks like a blow to the Affordable Care Act. But looks can be deceiving, observes Nicholas Bagley of the University of Michigan Law School. The health insurers are entitled to their money, even if it’s not specifically appropriated as part of the ACA.
“Health plans that get stiffed can therefore sue the federal government for the cost-sharing reductions,” Bagley writes. Once the lawsuits are filed in the U.S. Court of Federal Claims, "winning those cases should be easy: the plans will just have to show that they’re owed money under the ACA. And here’s the kicker: Congress has permanently appropriated the money to pay court judgments, even if it hasn’t appropriated money for the cost-sharing reductions. The right question isn’t whether health plans will get paid. It’s when.” (Emphasis in the original.)
But Bagley points out that the process of going to court will be “costly and disruptive,” especially if the court insists on every health plan filing a separate claim. To cover the cost of “Congress’ bullheaded refusal” to appropriate money it knows to be owed, insurers will have to raise premiums, if not to the extent the Urban Institute projects.
No lawsuits have yet been filed for the cost-sharing funds. But if the courts continue to find in the House’s favor, they will be.
That brings us back to the other misguided wrench Congress tried to throw into the Obamacare works. In 2014, the House slipped a provision credited to Rubio into a spending bill to prevent what he cynically called a “bailout” of insurers. He was referring to the risk corridors, a three-year program covering the initial rollout of the ACA individual exchanges. Under the program, insurers that paid out more in benefits than they anticipated would get a partial reimbursement from the government, and those that paid out less than expected would have to return some of the windfall.
The expectation was that these obligations would balance out, but that outcome wasn’t certain; after all, the very point of the program was to provide a safety valve for insurers during a period when no one really knew how the new market would function. The program’s goal was to keep premiums stable until the uncertainties shook out -- which would benefit customers.
Rubio’s rider prohibited the use of federal funds to cover any shortfall. In 2014 there was a shortfall. Consequently, the plans that are owed owed money will receive only 12.6 cents on the dollar -- $362 million to cover claims of $2.87 billion. The administration hopes to make up the deficit from money due profitable plans this year and next, but no one can be sure there will be enough.
The monkey wrench didn’t kill Obamacare, which was Rubio’s goal, but it did have an impact. The lack of full reimbursement contributed to the collapse of a dozen healthcare co-ops that had been created to provide coverage to individuals and families, interfering with coverage of some 800,000 Americans. Many, if not most, of these co-ops likely would have survived if the promised financial cushion was there for them when expected. For some reason, Rubio was so inordinately proud of this fiasco he created that he bragged about it during his ill-starred campaign for president. But as Richard Mayhew of Balloon-Juice.com observed in December:
“The Rubio rider causes a lot of chaos, does not actually solve the problem it is superficially intended to solve, costs the government more money in the short term as the benchmarks are recalculated upwards, and costs the government more money in the long term as there are fewer insurers and thus less competition....Brilliant!”
And as was predictable, litigation followed. In February, an Oregon health co-op filed a $5-billion class-action lawsuit in the Court of Federal Claims seeking the money. Highmark’s lawsuit is similar.
Once again, experts think the plaintiffs have a good argument, which means the money that’s owed will be paid out, sooner or later. In the meantime, hundreds of thousands of customers were harmed, nothing was saved, and the nation’s healthcare system was burdened with unnecessary expense. One would be tempted to chalk this up to the law of unintended consequences, except that it looks like an intended consequence. The only question is why the ACA’s opponents intended it.