Here's a tangled web: It appears that some of the federal government's profit-loss payments to insurers are at once obligated and prohibited.
A Government Accountability Office review of the Department of Health and Human Services plans for the ACA risk corridor program is raising some questions about whether those payments can and will go forward.
Under the risk corridors, a cousin of the risk adjustment and reinsurance programs, for 2014, 2015 and 2016, HHS is authorized to collect fees from individual and small group public exchange plans with profit margins above three percent profits and redistribute them to plans with negative margins under three percent.
The trouble is, as the GAO found, HHS may not get the appropriations for risk corridor payments in fiscal year 2015 -- when the agency intends to administer this year's profit-loss sharing -- and yet the payments have still been signed into contract with private insurers.
While this year's budget authorized and allocated monies for the program, HHS intended to both collect and distribute risk corridor funds for fiscal year 2014 in FY 2015. According to the GAO, though, federal law prohibits HHS from using FY 2014 appropriations in FY 2015.
"It is likely that Republicans in the House will oppose appropriating money for the risk corridor program," as healthcare lawyer and ACA guru Timothy Jost wrote in Health Affairs. "If there are no appropriations, it is quite probable that some insurers will suffer serious losses for 2014."
At the same time, HHS has signed contracts with insurers selling qualified health plans in public exchanges that guarantee the risk corridor program's payments, which insurers in turn factored into premiums.
"The government, like a private party, is bound by its contracts," wrote Jost, who teaches at Washington and Lee University. "Insurers who would have secured risk corridor payments may sue in the Court of Claims to enforce this contract."
What would a judge decide? Enforcing federal law on agency appropriations and spending, or the Fifth Amendment's contract and property rights protections?
As Jost noted, "the failure of the United States to honor its commitment to private insurers under the risk corridor program could be an unconstitutional taking."
Of course, the best remedy to this paradox -- whether or not the risk corridor currently is alive or dead -- would be a comprehensive federal budget. The challenge there is getting a budget through Congress. HHS, like all federal agencies, is operating under a continuing resolution and does not yet have an appropriation for fiscal year 2015.