The WasteWatcher: The Staff Blog of Citizens Against Government Waste

Breaking the Law – Again

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.


Since the Affordable Care Act (ACA), or Obamacare, was signed into law on March 2010, the Obama administration has changed the law 43 times without Congressional approval. The Galen Institute has been keeping track of these administrative changes, which you can find here. Apparently another illegal administrative action, which will cost the U.S. Treasury $3.5 billion, can be added to the list. Late last Friday, and conveniently before a long weekend, the Centers for Medicare and Medicaid Services (CMS) announced in a guidance document it would have $7.7 billion in reinsurance payments to cover the losses Exchange plan insurers incurred in 2015.  But CMS is not entitled to $3.5 of the $7.7 billion it is giving away. By way of background, reinsurance is one of the three risk mitigation programs that were created under Obamacare to protect insurers from losses occurred during the transition to the new health insurance mandates. The other two programs are risk adjustment and risk corridors. Together, the three programs are often called “The Three Rs.”  The reinsurance and risk corridor payment programs are due to expire the end of 2016, while the risk adjustment program is permanent. According to Seth Chandler, a law professor at the University of Houston Law Center, what is occurring  is “a scheme in which the Obama administration collected less in taxes from health insurers (mostly off the Exchanges) than they were required to do under the Affordable Care Act, created a plan to pay insurers selling policies on the Exchange considerably more than originally projected, and stiffed the United States Treasury on the money it was supposed to receive from the taxes.” He lays out how the diversion of funds came about in a January 18, 2016 Forbes article. He said the “consequence of the diversion of funds was to enrich insurers and, probably, to keep more insurers selling policies on the Exchanges than would otherwise be the case.” Doug Badger, a healthcare policy expert, writes in his blog that the “theft of $3.5 billion will help prop up insurers that have agreed to sell Obamacare policies in the individual market. Behind the happy talk from Administration officials about the program’s success lies an unpleasant truth: insurers that participate in Obamacare Exchanges are bleeding money.” Badger notes that under the reinsurance program, nearly everyone with health insurance is being taxed through their employer or insurer.  He writes that doing so is “to help insurance companies keep their heads above water. The government has been collecting the money from the premiums that are supposed to pay for your family’s medical care without bothering to let you know.” These taxes were intended to raise $12 billion last year and CMS was required by ACA to remit $2 billion to the U.S. Treasury with the remaining amount to be distributed to insurers that experienced losses. But according to Badger, just under $10 billion was raised last year and instead of paying the Treasury as required by law, CMS distributed all the money to insurers that sold policies in the individual market.  Since they got away with it last year, they are doing it again this year bringing the total amount stolen from the Treasury to $3.5 billion.  Without this bailout money, insurers would be required to price Obamacare plans at their true costs or be forced to stop selling their insurance policies in the Exchanges. Citizens Against Government Waste laid out in its December 2015 WasteWatcher how one of the other Three Rs, the risk corridor provision, was also not bringing in sufficient funds to prop up the insurers, thus leading the administration to look to taxpayers for the rest of the money. Senator Marco Rubio (R-Fla) called the administration out on it in late 2013 and Congress stopped them. It certainly appears Congress would need to take action with the reinsurance provision to make sure the Obama administration follows the law they created and stop stealing funds from the Treasury.

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