CMS ‘Reinsurance’ Program Deceives U.S. Treasury Department, Taxpayers
The list of failures, misrepresentations and falsities surrounding the implementation of the Affordable Care Act (ACA) is almost unending. First there was the assurance that under the ACA if Americans liked their doctor, they could keep them. However upon implementation we learned that was not going to be the case. Then there was the botched management of healthcare.gov, originally projected to cost taxpayers $464 million to develop, then ended up costing $824 million. Now there are reports of a new illicit action by the Centers for Medicare and Medicaid Services (CMS), and this one has a price tag in the billions.
There is a little known ‘reinsurance’ fee that has been added to every private health insurance policy sold as either an employer plan, or on the Marketplace Exchanges. The fee, authorized by Section 1341 of the ACA amounts to $44 per year, per individual, collected from insurers by CMS. Different from the ‘risk corridor’ program, the ‘reinsurance’ program was designed to protect insurers by providing them a safety net resulting in an additional cost passed onto healthcare consumers.
An annual requirement of the reinsurance program is that $2 billion of revenues be paid back into the general fund of the U.S. Treasury. However, in 2015, out of the $7.7 billion CMS received in reinsurance payments, CMS reported to only remit $500 million of the $2 billion for that year, instead diverting public funds from the Treasury Department to private insurers.
On February 24, 2016, the House Energy and Commerce Subcommittee on Health held a hearing with Health and Human Services Secretary Sylvia Burwell who provided testimony on their department’s proposed budget. According to hearing records, “…when asked about the legality of these payments, Sec. Burwell did not directly answer the question. While admitting they did not have a legal memorandum on the payments, Secretary Burwell said she was comfortable with their interpretation of the law.”
Having blocked the taxpayer funded insurance bailout through the ‘risk corridors’ program, the Obama Administration has been looking for monies to make up for record losses for insurers participating in the Marketplace Exchanges, and it seems they have found it through the reinsurance program. Because of the threat by UnitedHealthcare and Humana to withdraw their participation in 2017, finding this funding mechanism is critical for keeping insurers at the table.
Unfortunately, money lost to the Department of Treasury general fund means propping up private insurers with money that was intended to go back to taxpayers. It was also unlawfully diverted as this action was not appropriated by Congress. Once again, we see how rules of the ACA create an artificial and heavily regulated market, rather than competition, incentives and transparency for healthcare providers and consumers in the U.S.