Paying For Risk Corridor Program May Violate Federal Law, Contend Sessions And Upton In Letter To HHS

Department of Health and Human Services (HHS) Secretary Sylvia Burwell received a letter on June 10, 2014 from House Energy and Commerce Committee Chairman Fred Upton (R-MI) and Senate Budget Committee Ranking Member Jeff Sessions (R-AL), informing her that her office may be about to violate federal law. The letter requests an explanation of Burwell’s stance on recent legal analysis by the American Law Division of the Congressional Research Service (CRS), concluding that Sec. 1342 of the Patient Protection and Affordable Care Act (ACA), which directs the HHS Secretary to operate a risk corridor program, fails to specify a source from which risk corridor payments are to be made.

Such a direction to pay absent a designation of a funding source does not amount to an “appropriation,” according to the letter. And, absent additional action by Congress appropriating funds for the risk corridor program, payments by the HHS to pay for the program would amount to an illegal transfer of funds, in violation of the Antideficiency Act (31 U.S.C. 1341). The letter states that, as the law now stands, risk corridor payments made by the HHS “…would constitute an unlawful transfer of potentially billions of taxpayer dollars to insurers….”

The risk corridor program was meant to protect against rate uncertainty by creating a mechanism for sharing risk between the federal government and qualified health plan issuers from 2014 through 2016. The exposure of benefit plan sponsors to unexpected expenses would be limited and would produce lower rates for consumers by relieving issuers of the need to add a risk premium to offset perceived uncertainties in the market. Health insurance issuers would be entitled to a payment if their plan’s allowable costs for the benefit year are more than 103 percent, but no more than 108 percent of their target amount.

Legislative history. In the letter, Upton and Sessions bolster their argument with legislative history. Specifically, they point out that Section 3106 of the Affordable Health Choices Act (S. 1679), reported out of the Senate in the early days of the ACA’s creation, directed the HHS Secretary to administer a risk corridor program and create a start-up fund for the program using “any moneys in the Treasury not otherwise appropriated.” The ACA, however, incorporated language from Section 2214 of America’s Health Future Act (S. 1796), which included neither a source of funds nor an appropriation. This shows, Upton and Session contend, that Congress “deliberately chose to review funding for the risk corridor program through the annual appropriations process.”

In addition to asking Burwell if she agrees with the CRS analysis, Upton and Sessions also have requested, by June 24, 2014, all HHS legal analysis of its statutory authority to make payments to issuers under the risk corridor program and of the HHS’s ability to make such payments absent additional congressional appropriation, along with a list of all funding sources the HHS thinks is available for risk corridor funding absent congressional appropriation.

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