Alyssa Lane
In 2020, the Obama administration was accused of unlawfully giving billions of dollars to private insurers. The U.S. Supreme Court ruled that the federal government must pay $12 billion to private insurers under an Obamacare provision. This provision was aimed at encouraging insurers to offer medical coverage to uninsured Americans. The Obama administration also set aside an additional $800 billion for the insurance industry in 2015.
| Characteristics | Values |
|---|---|
| Did Obama give billions to insurance carriers? | Yes |
| Year | 2014 |
| Amount | $8.7 billion |
| Reason | To pay off insurers selling policies on the Exchanges |
| Supreme Court Ruling | The federal government must pay $12 billion to private insurers under an Obamacare provision |
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What You'll Learn
Obama administration unlawfully gave billions to insurance carriers
In 2014, the Obama administration gave $8.7 billion to the insurance industry. This was $7.9 billion more than what was promised to them for that year, with the remaining $800 million set aside for the industry for the next year. This move was in violation of the statute, as the money was supposed to go to the Treasury and not be used for the transitional reinsurance program. The Obama administration manipulated the interpretation of the statute, claiming that it was silent on whether money could be used to support insurance companies.
The Obama administration also set the parameters of the reinsurance program for 2014, stating that it would pay 80% of claims above $60,000, up to $250,000. This degree of generosity was expected to exhaust the $10 billion budget for that year. However, the administration did not adjust the reinsurance parameters or issue a supplemental assessment to account for any shortfall in collections.
The Obama administration's actions have been described as unlawfully giving billions of dollars to private insurers, reversing the priorities of the statute and only collecting enough money to pay off the insurers selling policies on the Exchanges. This interpretation of the statute was bogus and resulted in the Treasury being shorted.
In 2020, the U.S. Supreme Court ruled that the federal government must pay $12 billion to private insurers under an Obamacare provision. This ruling was made to encourage insurers to offer medical coverage to previously uninsured Americans. The Supreme Court's decision reversed a lower court's ruling that Congress had suspended the government's obligation to make such payments.
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Money was supposed to go to the Treasury
In 2020, the Obama administration was accused of unlawfully giving $8.7 billion to the insurance industry. This money was supposed to go to the Treasury, with $7.9 billion promised to insurers for 2014 and the remaining $800 million set aside for the insurance industry in 2015. The Obama administration's actions were criticized as a violation of statutes and earlier regulations, including a statement claiming that it had no legal authority to defer payments to the Treasury.
The Affordable Care Act (ACA), also known as Obamacare, played a significant role in encouraging private insurers to offer medical coverage to previously uninsured Americans. The federal government was obligated to pay these insurers under the ACA, and the U.S. Supreme Court ruled in favor of this, paving the way for a substantial one-time cash infusion for major insurance companies. This ruling was based on the law's risk corridor program, which aimed to mitigate insurers' risks when selling coverage to the previously uninsured through Obamacare exchanges.
The Obama administration's interpretation of the statute related to the earmarked funds was questioned, and it was accused of only collecting enough money to pay off the insurers, rather than other claimants on the fund. Additionally, the administration's method was criticized for potentially reducing incentives to control costs and rewarding carriers with ineffective medical management.
In a separate but similar incident, former First Lady Michelle Obama was the subject of a rumor claiming that she had agreed to repay $2.3 million to the Department of the Treasury for "White House expenses." However, this rumor was later debunked as originating from a satirical Facebook page, and no reputable news outlets reported on the story.
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Obama administration did not adjust reinsurance parameters
The Obama administration has been accused of unlawfully giving billions of dollars to private insurers. This money was supposed to go to the Treasury to pay off money spent on another part of the Affordable Care Act (ACA), also known as Obamacare. The Obama administration did not adjust the reinsurance parameters. Instead, they dedicated the entire $8.7 billion to the insurance industry.
The Obama administration could have taken several approaches to address the 28% shortfall in collections in 2014. One option was to increase the per-covered-life assessment, bringing the total amount collected to $12 billion. Another option was to give the Treasury its statutory $2 billion and adjust the payment rate to ensure that the reinsurance payments exhausted the remaining $6.7 million. However, the administration did not pursue either of these options and did not issue a supplemental assessment.
The Obama administration's decision to dedicate the full $8.7 billion to insurers has been described as a violation of statutes and earlier regulations. The money collected for the Treasury is not supposed to be used for the transitional reinsurance program. However, the Obama administration interpreted the statute as silent on whether these funds could support insurance companies.
The Obama administration set the parameters of the reinsurance program for 2014, offering to pay 80% of claims above $60,000, up to $250,000. They believed that this level of generosity would exhaust the expected $10 billion for that year. The risk corridor program was designed to mitigate insurers' risks from 2014 to 2016 when they sold coverage to previously uninsured individuals through Obamacare exchanges. Insurers who paid out less in claims provided some of their gains to the government, while those who paid out more were entitled to government compensation.
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Insurers sued the Department of Health and Human Services
In 2020, Forbes published an article claiming that the Obama administration had "raided the Treasury" to pay off insurers. The article alleges that the administration gave $7.9 billion to private insurers for 2014 and set aside a further $800 billion for them in 2015. This money was meant to go to the Treasury and was collected from various health plans. The article also claims that the administration's actions violated statutes and its own earlier regulations.
In response to these allegations, it is worth noting that the Affordable Care Act (ACA), also known as Obamacare, depends on the cooperation of private insurers. The ACA includes a provision that money collected for the Treasury cannot be used for the transitional reinsurance program. However, the Obama administration interpreted the statute as silent on whether money collected for the Treasury could support insurance companies.
According to the Department of Justice, the United States filed a complaint in 2025 against three of the nation's largest health insurance companies: Aetna, Elevance Health (formerly known as Anthem), and Humana. The complaint alleged that these insurers had paid hundreds of millions of dollars in illegal kickbacks to brokers in exchange for enrolments into their Medicare Advantage plans from 2016 through at least 2021. The case was handled by the Attorney's Office for the District of Massachusetts, with assistance from the Department of Health and Human Services (HHS) Office of Inspector General and the FBI.
The complaint further alleged that Aetna and Humana conspired with broker defendants to discriminate against Medicare beneficiaries with disabilities, threatening to withhold kickbacks to enrol fewer disabled beneficiaries. The defendant brokers or their agents rejected referrals of disabled beneficiaries and directed them away from Aetna and Humana plans. The United States Attorney Leah B. Foley stated that "profit and greed over beneficiary interest" would continue to be investigated and prosecuted. The False Claims Act (FCA) permits the United States to intervene in such cases, and if a defendant is found liable, the government may recover three times its losses plus applicable penalties.
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Supreme Court ruled in favour of insurers
The Obama administration was accused of unlawfully giving billions of dollars to private insurers. This money was meant to go to the Treasury, but the administration used a bogus interpretation of a statute to divert it to insurers instead. This was done to pay off money spent on another part of the Affordable Care Act (ACA), also known as Obamacare.
The Supreme Court ruled in favour of insurers, ordering the federal government to pay $12 billion to private insurers under Obamacare. This ruling was authored by liberal Justice Sonia Sotomayor and resulted in an 8-1 decision. The Supreme Court's decision reversed a lower court's ruling that Congress had suspended the government's obligation to make such payments under the ACA.
The case concerned payments to insurers under the law's risk corridor program, which was designed to mitigate insurers' risks from 2014 to 2016 when they sold coverage to previously uninsured people through exchanges established under Obamacare. Insurers that paid out less in claims than they took in from premiums provided some of their gains to the government, while insurers that paid out more were entitled to government compensation. From 2015 to 2017, Congress passed legislation barring the use of general funds to pay these obligations, leading insurers to turn to the federal courts.
The Supreme Court's ruling paved the way for a significant one-time cash infusion for major companies such as Humana Inc, Anthem Inc, and Centene Corp. It also ensured that the federal government honoured its obligations for services the private sector had already delivered. The decision was applauded by Matt Eyles, president of America's Health Insurance Plans, who stated that it demonstrated the government's commitment to its obligations.
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Frequently asked questions
Yes, the Obama administration gave billions of dollars to private insurers.
The money was owed to the insurers under an Obamacare provision aimed at encouraging them to offer medical coverage to uninsured Americans.
The Obama administration dedicated the entire $8.7 billion to the insurance industry.
No, the Obama administration acted unlawfully by giving billions to insurance carriers. The money was supposed to go to the Treasury.
Yes, the Affordable Care Act, also known as Obamacare, enabled millions of previously uninsured Americans to obtain insurance.
