U.S. guarantees funds to offset insurers' losses

Foes of health-care law call move a government bailout

WASHINGTON -- President Barack Obama's administration has quietly adjusted key provisions of its signature health-care law to potentially make billions of additional taxpayer dollars available to the insurance industry if companies providing coverage through the Patient Protection and Affordable Care Act lose money.

The move was buried in hundreds of pages of new regulations issued late last week. It comes as part of an intensive administration effort to hold down premium increases for next year.

Administration officials for months have denied assertions by opponents that they plan a "bailout" for insurance companies providing coverage under the health-care law.

They continue to argue that most insurers shouldn't need to substantially increase premiums, because safeguards in the health-care law will protect them over the next several years.

But the change in regulations essentially provides insurers with another backup: If they keep rate increases modest over the next couple of years but lose money, the administration will tap federal funds as needed to cover shortfalls.

Criticism to the change started surfacing Tuesday.

"If conservatives want to stop the illegal Obamacare insurance bailout before it starts they must start planning now," wrote Conn Carroll, an editor of the right-leaning news site Townhall.com.

On Capitol Hill, Republicans on the Senate Budget Committee began circulating a memorandum on the issue and urging colleagues to fight "another end-run around Congress."

Obama administration officials said the new regulations would not put taxpayers at risk.

"We are confident this three-year program will not create a shortfall," Health and Human Services Department spokesman Erin Shields Britt said in a statement. "However, we want to be clear that in the highly unlikely event of a shortfall, HHS will use appropriations as available to fill it."

Although more than 8 million people signed up for health coverage under the law, exceeding expectations, insurance companies in several states have been considering significant rate increases for next year over concerns that their new customers are older and sicker than anticipated.

Insurers around the country have started to file proposed 2015 premiums, just as the midterm campaigns are heating up.

Proposed increases in a few states where insurers have already filed 2015 rates have been relatively low, with several major carriers seeking just single-digit increases. But insurers in closely watched states, such as Florida, Pennsylvania, North Carolina and Arkansas, are still preparing their filings.

"It's absolutely paramount to keep premiums in check," said Len Nichols, a health economist at George Mason University who has advised officials working on the law.

The state-based marketplaces, which opened last year, allow consumers to shop among plans that meet basic standards. Sick consumers cannot be turned away, and low- and moderate-income Americans qualify for government subsidies to offset their premiums.

To stabilize the new system, the law set up a complex system of funds, including one known as the Temporary Risk Corridors Program, that collects money from insurers and transfers it from companies with healthier, less expensive consumers to those with sicker, more costly consumers.

This system was supposed to pay for itself, as does a similar one used to shift money between drug plans in the Medicare Part D program.

But insurance industry officials have increasingly expressed concerns about the new system's adequacy.

Pressure seems to be most acute on insurers in states where healthy consumers were allowed to remain in old plans that are not sold on the new online marketplaces, an option Obama offered to states during an uproar over plan cancellations last year. The president had promised people would be able to stick with their plans.

Maintaining the old plans kept many healthy consumers out of the marketplaces, making the pool of new customers less healthy and therefore potentially more expensive for insurers, according to experts.

In a series of White House meetings over the past several months, Obama and other senior administration officials have sought to persuade insurance company CEOs to nonetheless hold rates in check, arguing that the marketplaces would stabilize over time.

But with proposed 2015 rates beginning to come in, the administration acceded to industry demands for a clear guarantee that more money would be available to cover potential losses.

"In the unlikely event of a shortfall for the 2015 program year, HHS recognizes that the Affordable Care Act requires the secretary to make full payments to issuers," the regulation published Friday notes. "In that event, HHS will use other sources of funding for the risk corridor payments, subject to the availability of appropriations."

That language allows the administration to tap funds appropriated for other health programs to supplement payments to insurers, according to administration and industry officials.

A Section on 05/22/2014

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