ACA Insurer Subsidy Gets GAO Scrutiny

The US Government Accountability Office says the Obama Administration had legal authority to pay subsidies to insurers on the new health insurance marketplaces in 2014. But that won't necessarily be the case in Fiscal Year 2015.

Insurers who offer plans on the government’s healthcare exchanges will only be able to receive scheduled subsidies if Congress includes specific language in its Fiscal Year 2015 budget, according to an opinion from the US Government Accountability Office (GAO).

The Affordable Care Act included a temporary “risk corridors” program that would limit the profits or losses insurers could incur by participating in the marketplaces. Under the program, insurers who lose money as a result of covering patients on the marketplace are eligible for subsidies to offset part of those losses. However, insurers who profit too much would have to surrender part of the “excessive” profits to the US Department of Health and Senior Services.

The idea was to stabilize premiums during the first years of the program, a time during which insurers were expected to face considerable uncertainty as to the fiscal effects of expanded insurance coverage. The program was set to be in place for the calendar years 2014, 2015, and 2016. However, as of May, HHS said it had yet to make any payments under the program.

In the meantime, 2 Republican lawmakers, Sen. Jeff Sessions (R-AL) and Rep. Fred Upton (R-MI), wrote to GAO asking whether HHS actually had the authority to make the payments under the 2014 federal appropriations bill.

In its report, GAO said the issue raises an important constitutional point.

“The making of an appropriation must be expressly stated by law,” the GAO said in its report. “It is not enough for a statute to simply require an agency to make a payment.”

In other words, GAO said the Affordable Care Act alone wasn’t enough to authorize the payments. Rather, Congress would have to specifically appropriate money each year for the purpose of risk corridor payment before HHS could legally make those payments.

However, GAO also found that the Centers for Medicare and Medicaid Services (CMS) program management (PM) appropriation for the Fiscal Year 2014 did, in fact, include such specific language.

“Consequently, the CMS PM appropriation for Fiscal Year 2014 would have been available for making the payments pursuant to section 1342 (the ACA section pertaining to the risk corridors program),” the GAO stated.

However, while GAO affirmed the government’s ability to make the payments in the last fiscal year, it warned that “for funds to be available for this purpose in FY 2015, the CMS PM appropriation for FY 2015 must include language similar to the language included in the CMS PM appropriation for FY 2014.”

Including that language could prove to be a political challenge, given controversial nature of the healthcare reform law and the upcoming mid-term elections. The federal government’s 2014 fiscal year began Oct. 1, though the budget has not been passed.