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Report Published: Jul 28, 2014

ObamaCare’s Taxpayer Bailout of Health Insurers and the White House’s Involvement to Increase Bailout Size

Key Findings:

          An insurance company CEO appealed directly to Valerie Jarrett, Senior Advisor to President Obama and Assistant to the President for Public Engagement and Intergovernmental Affairs, after the Administration signaled its intent in March 2014 to implement the Risk Corridor program in a budget neutral manner. Chet Burrell, the President and CEO of Care First Blue Cross Blue Shield, wrote to Ms. Jarrett that insurers would likely require Risk Corridor payments on net and that budget neutrality would lead insurers “to increase rates substantially (i.e., as much as 20 percent or more…).”

          Ms. Jarrett intervened and wrote to Mr. Burrell that “the policy team is aggressively pursuing options.” After the Administration explained how it would implement the Risk Corridor program in April 11, 2014 guidance, Ms. Jarrett wrote to Mr. Burrell that the Administration had given insurance companies 80 percent of what they sought. However, in a May 2014 final regulation, the Administration further increased the generosity of the taxpayer bailout for insurance companies.

          Key White House employees, including Tara McGuiness, the White House’s Communications Director, and Chris Jennings, Deputy Assistant to the President for Health Policy, and Coordinator for Health Reform from July 2013 through January 2014, traded talking points for TV appearances, including on Meet the Press and CBS Evening News, with health insurance executives on how to best message problems with and also the fact that millions of people were losing their insurance coverage because of ObamaCare. For example, Mr. Jennings and Ms. McGuiness provided talking points to Florida Blue Cross and Blue Shield CEO Patrick Geraghty in preparation for an October 27, 2013, appearance on Meet the Press.

          The Administration has indicated that it plans to use taxpayer funds to compensate insurers through the Risk Corridor program if insurers systematically lose enough money on these plans. In total, the insurers and co-ops surveyed by the Committee expect net payments through the Risk Corridor program of about $725 million in 2014. The total taxpayer bailout expected by insurance companies could approach $1 billion this year.

          Twelve of the 15 traditional insurance companies surveyed by the Committee expect Risk Corridor payments, one company expects to pay into the program, and two companies expect no net payments.

          Insurers’ expectations for the amount of net payments through the Risk Adjustment program have nearly doubled since October 1, 2013.

          Enrollment information provided by insurers show that insurers enrolled a much older risk pool, on average, in their ObamaCare-compliant plans than they anticipated.


“Risk Corridors” are provisions of ObamaCare designed to transfer money from profitable insurance companies participating in ObamaCare to insurance companies that suffer losses selling ObamaCare-compliant plans on the exchanges. However, the law provided for a taxpayer-funded bailout if insurance companies systematically lost money on their ObamaCare plans. In February 2014, the Congressional Budget Office (CBO) produced a controversial estimate that ObamaCare’s Risk Corridors would provide a net $8 billion return to taxpayers.

To provide clarity in response to CBO’s estimate, the Committee sent requests to insurance companies requesting their projections for payments through the Risk Corridor program. Among today’s House Oversight report findings is that almost all insurance companies expect to receive Risk Corridor payments to cover their expected losses on ObamaCare-compliant plans. The projections suggest that the size of the bailout will approach $1 billion this year alone. Between October 2013 and May 2014, the projected size of this bailout increased by more than 33 percent.

You can read the full report here, and the email appendix can be viewed here.