END OF 2018 OPEN ENROLLMENT PERIOD (42 states)

Time: D H M S

RETURN OF THE RUBI-CON: Marco Rubio killed jobs, helped force 800K people off policies & may cost taxpayers $2.5B...for no reason at all.

From December 1, 2015:

Hey, remember the Risk Corridor Massacre? The one which is at least partly responsible (and in some cases, mostly responsible) for a dozen ACA-created Co-Ops (as well as at least one private insurance carrier in Wyoming) going out of business?

Well, there's two more rather interesting developments to the Risk Corridor mess.

...This fall, more than a dozen health insurers representing 800,000 people have dropped out of the ObamaCare exchanges, many out of fear that the administration no longer has the cash to cushion their losses in the costly early years of the marketplace.

The nation’s largest insurer, UnitedHealthCare, specifically mentioned the specter of a funding shortfall last week when it threatened to end its participation in the exchanges after 2016.

The angst in the industry centers on an obscure program in the healthcare law known as “risk corridors” that was designed to shield insurers against losses.

Rubio in 2013 went on the warpath against the program, decrying it as a “taxpayer bailout.” He penned op-eds against it, testified about it as the star witness at a House Oversight Committee hearing and even made his case to top House Republicans including then-Speaker John Boehner (R-Ohio).

OK, so Marco Rubio--the same genius who, while a Florida State Representative, pushed through a completely useless, waste-of-taxpayer-money boondoggle called "Florida Health Choices"--is absolutely gleeful about helping put several hundred people out of work across a dozen states and simultaneously throwing hundreds of thousands of people (as well as dozens of healthcare providers) into a panic as they scramble to replace their coverage on only a couple month's notice.

Well, as I noted at the time, U of Michigan law professor Nicholas Bagley noted at the time that the insurance carriers who were supposed to receive the cut-off Risk Corridor payments might still end up getting paid in the end after all...by suing the federal government, with a very solid justification:

The administration has vaguely said that it will “use other sources of funding for the risk corridors payments, subject to the availability of appropriations.” But the budget bill limits the administration’s power to dip into other funds, and a Republican-controlled Congress isn’t likely to appropriate money for a program that’s been decried as an insurer bailout.

But there’s another option, one that hasn’t received much attention. When Congress creates an entitlement directly in legislation, the person who’s supposed to get the entitlement can file a lawsuit in the Court of Federal Claims to recover what she’s owed.

...The same principle holds (1) where Congress vests a federal agency with the power to obligate the United States to make certain payments and (2) the agency welches on those obligations. Here, the ACA instructs HHS to create a risk corridor program requiring the government to pay health plans a given amount of money. If the past is any guide, plans should be able to sue if HHS doesn’t pay them in accordance with the program. That’s so whether or not Congress has appropriated money to fund the program.

In other words, the HHS Dept. is legally required to make the payments even though Congress cut off the funding to do so.

As Bagley concluded:

That’s small consolation to the co-ops that needed risk corridor payments now to stay afloat. But the question for health plans isn’t whether they’ll get paid. It’s when. Marco Rubio hasn’t killed Obamacare and he hasn’t saved taxpayers any money. All he’s done is throw a wrench in the works.

Richard Mayhew wrapped things up nicely:

...So 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. The big winners are Rubio (as he gets to fundraise and preen off of it) and incumbent insurers that have large cash reserves.

Brilliant!

That brings this idiotic saga up to date. Cut to yesterday, when, just as Bagley predicted, a massive class action lawsuit has indeed just been filed in federal court against the federal government to demand that they cough up the loot owed to a whole mess of insurance carriers. As Nick Budnick reports in the Portland Tribune:

Health Republic Insurance Company of Oregon, a Lake Oswego-based insurer that is phasing down its operations, on Wednesday filed a $5 billion class action lawsuit on behalf of insurers it says were shorted by the federal government under an Obamacare program.

The lawsuit, filed in the United States Court of Federal Claims, focuses on a program that was intended to offset insurer losses in the early years of the implementation of the Patient Protection and Affordable Care Act.

Instead, payments to insurers under the “risk corridor” program amounted to 12.6 percent of the amount expected for 2014, and are expected to be similarly low for 2015.

Federal law and regulations "are unequivocal about the payments the Government must make," according to the lawsuit. "The law is clear: the Government must abide by its statutory obligations."

Bagley has an updated piece about the lawsuit which focuses on some interesting questions: Whether the case been filed too soon; whether it's OK to do it as a single "class action" suit (as opposed to each carrier having to file separately); and whether the Dept. of Justice will even bother defending the government under the circumstances.

I'm no lawyer, but there are two other aspects to the suit which caught my eye:

  • First, I assumed that if anyone did file a lawsuit over this, it would be one of the big, private carriers who's owed money, like UnitedHealthcare. Instead, the suit is being filed by none other than Health Republic of Oregon...one of the Co-Ops which was actually forced out of business in large part due to the risk corridor debacle. Apparently they're still in the process of winding down as a legal entity (most of the Co-Ops had to continue operating up through New Year's Eve, though the New York Co-Op had to shut down even earlier).
  • Second, and more to the point: Note the amount of the lawsuit: $5 billion. This is noteworthy because the actual amount owed to the various carriers for 2014 losses was $2.87 billion, of which $362 million was actually paid out. That means that they're suing for twice as much as the carriers were owed in the first place.

Now, it's possible that they only jacked up the ask in order to have some wiggle room to negotiate a settlement...but according to Janet Weiner of the Leonard Davis Institute of Health Economics, the $5 billion figure includes "consequential, special and other damages", which I assume includes things like legal fees, lost revenue, damage to reputation, extra interest/fees due to having to make late payments and so forth.

In fairness, as Adam Cancryn noted in his epic Risk Corridor Autopsy piece, there were a lot of other factors which caused half of the Co-Ops to fail in the first two years. It's possible that some of them would have gone under even with the RC money, and there's no guarantee that all of the remaining ones will thrive or even survive. But there's no denying that the RC payments they were counting on were a major factor, and at least a few of them would almost certainly have survived if not for having the rug yanked out from under them.

So, to review, the end result of Marco Rubio's shenanigans are:

  • up to 800,000 people nationally lost their insurance coverage, on very short notice, and were forced to scramble to find alternate coverage
  • the new coverage these people ended up with is generally more expensive, and in many cases has worse networks
  • the federal government has to therefore pay out more in premium subsidies to cover the increased costs as benchmark plans were increased
  • over a dozen insurance carriers went out of business, meaning hundreds of people lost their jobs
  • the loss of over a dozen carriers means less competition in those markets, therefore less competition, therefore higher premiums, therefore even more cost to the federal government in subsidies to make up the difference
  • since all of the carriers which went out of business were little guys, this also means the big kahunas suck up even more market share
  • the original $2.5 billion which Rubio was supposedly trying to "save" taxpayers ends up being paid out anyway; and
  • it's possible that, in addition to all of this, assuming the government decides to just concede the point (which, by all rights, they should), it's conceivable that Marco Rubio's "genius" stunt from December 2014 could also very well end up costing taxpayers $2.5 billion MORE than it would have to just let the government make the payments they were supposed to in the first place.

...all so that Marco Rubio could earn a couple of political brownie points to help him win the GOP nomination for President...which he appears to be failing at anyway.

Never has a sarcastic golf clap been more appropriate.