The Department of Health and Human Services cannot legally bail out the insurance industry for excessive losses through President Obama's health care law unless the U.S. Congress approves language allowing the administration to do so, according to a legal opinion released on Tuesday by the Government Accountability Office.
The ruling could end up provoking a showdown between the White House and Congressional Republicans over ObamaCare that has the potential to affect health insurance premiums.
At issue is the "risk corridors" program, which aims to stabilize the insurance market on the new health insurance exchanges during the early years of ObamaCare. Because the law requires insurers to offer coverage to those with pre-existing conditions and limits how much insurers can charge older and sicker patients, insurers who join the exchanges risk getting stuck with a disproportionate number of older and sicker beneficiaries, translating into losses that could discourage companies from participating.
The "risk corridors" program is one of several provisions within ObamaCare aiming to mitigate this problem. In theory, it's supposed to do so by making payments to insurance companies who experience higher-than-expected medical losses from a stream of money collected from insurers who have lower-than-expected losses. But a scenario in which the risk pool is so skewed toward older and sicker Americans that there are large industry-wide losses could result in a de facto bailout of the insurance industry by requiring an injection of money from taxpayers. This potential scenario has prompted the attention of a number of Republican lawmakers.