Government Illegally Diverts Billions to Obamacare Reinsurance Slush Fund

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Posted by Sarah Feldpausch, Alexander Hendrie on Monday, February 22nd, 2016, 4:43 PM PERMALINK


In a late Friday afternoon news dump before the President’s day holiday weekend, the Obama administration announced that it would pay out $7.7 billion to Obamacare insurers through the reinsurance program – including $1.7 billion in illegal payments. In all, the administration has unlawfully funneled $3.5 billion into this program.

For 2015 Obamacare reinsurance, the administration will pay out $6 billion raised from a fee on private health insurance and an additional $1.7 billion that under federal law belongs to the Treasury department. Indeed, the decision by the Obama administration directly violates section 1341 of Obamacare which explicitly states “money shall be deposited into the general fund of the Treasury of the United States and may not be used for the [reinsurance] program established under this section.”

The Obamacare reinsurance program was one of three programs (together with risk corridors and risk adjustment) created to hide the true costs of coverage on the exchange and prop up insurers by redistributing funds from different groups to Obamacare exchanges. In the case of reinsurance, this took the form of a $44 assessment on each individual with private health insurance.

As Doug Badger of the Galen Institute explains, Obamacare reinsurance for 2014 was supposed to raise $12 billion, but fell $2 billion short. To deal with this shortfall, the administration simply decided not to pay Treasury what it was owed. Now, the administration is at it again.

In fact, according to the House Energy and Commerce Committee, the Administration has used Obamacare’s web of corporate welfare programs to unlawfully funnel $8.5 billion in taxpayer to the law.

Just last year, the government announced that the Risk Corridor program – a revenue neutral program that redistributed funds from Obamacare insurers on the exchange that made money to those that did not – could pay insurers just 12.6% of what they requested.

Despite a shortfall that totaled over $2.5 billion, Obamacare chief Andy Slavitt announced he would bailout insurers. Coincidentally, Slavitt is also a former VP for United Health, one of the largest insurers on the Obamacare exchanges.

Fortunately, Congress was able to block this textbook case of corporate welfare and stop the $2.5 billion in unlawful payments.

Indeed, despite this continued stream of corporate welfare premiums continue to skyrocket for those on the exchanges. For the 2016 coverage year, Obamacare premiums have increased by as much as 50 percent in some states, according to recently released data compiled by Freedom Partners. Of the 50 states, enrollees in 34 states saw a top increase in premiums of 20% or more.

Clearly, the Obama administration has no intention of following their own laws and is determined to provide billions upon billions of dollars in corporate welfare to Obamacare insurers. Given this reality, Congress has a duty to provide strong and aggressive oversight to protect taxpayer dollars from being wasted on this failed law.

Photo Credit: 
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