How Obamacare Execs Broke the Law and Cost Taxpayers Billions

How Obamacare Execs Broke the Law and Cost Taxpayers Billions


Just how far did the Obama administration go to keep its failing signature program afloat? According to a new report from the Government Accountability Office, its Health and Human Services Department broke the law to bail out insurers participating in the health-insurance exchanges established by the Affordable Care Act. In doing so, it took funds meant to protect taxpayers and instead used them to pay off larger-than-expected losses under Obamacare.

At issue is the Transitional Reinsurance Program, designed to allow insurers a space of three years to find effective calculations for risk and to stabilize premium prices. The ACA statute authorized HHS to collect $10 billion from insurers in 2014 to fund the reinsurance program using a method of its own devising to calculate “proportionate” contributions from each insurer, plus another $2 billion to pass to the Treasury.

Related: Obamacare Insurers Are Looking for a Taxpayer Bailout

Those figures diminish to $6 billion in 2015 with another $2 billion for Treasury, and then to $4 billion and $1 billion in the final year of 2016. The HHS share would be used to subsidize insurers based on the extent of losses, while taxpayers would be guaranteed a return on the program.

That’s what was supposed to happen. Republicans in Congress found out that HHS didn’t competently calculate the insurer contributions to the program – and decided to keep all of the money instead. They demanded an investigation by the GAO, which confirmed that HHS had violated the law by keeping the funds without Congressional authorization. That amounts to $5 billion that HHS took from the general fund, and kept without specific Congressional appropriation.

GAO makes it clear that the Treasury contributions had to be kept separate from fund disbursements. The statute clearly states that the portions designated for the general fund “shall be deposited into the general fund of the Treasury of the United States and may not be used for the program established under this section [emphasis mine.” The law could not possibly be clearer on this point.

Related: Obamacare: Costs Go Up, Insurers Drop Out and Consumers Get Screwed

Despite this clarity, GAO found that HHS used the money for the program anyway. “When total collections for benefit year 2014—$9.7 billion—fell short of the target amount for reinsurance payments, HHS did not allocate any collections to the Treasury or to administrative expenses,” GAO investigators reported.

“The agency received $7.9 billion in reinsurance claims and paid these in full, leaving approximately $1.7 billion in collections, which it carried over for reinsurance payments in subsequent benefit years.  As a result, HHS did not deposit any amounts collected from issuers into the Treasury.”

In other words, HHS deliberately violated the law and stiffed taxpayers. Even worse, they banked the leftover cash rather than even attempting to comply with the statutory requirements of Obamacare.

When GAO pressed them for an explanation, they claimed the shortfall in contributions exempted them from the plain language of the statute. GAO’s investigators scoffed at this interpretation, which they conclude requires the abandonment of plain English and context to achieve inconsistency, not just with the statute, but HHS’ own regulations promulgated from it.

Related: Obamacare Price Hikes Could Cost Democrats Control of the Senate

Even with all of this illegal use of funds, the reinsurance program has failed at its basic purpose. Premiums haven’t stabilized at all – they have escalated almost exponentially since Obamacare’s first open enrollment in the autumn of 2013.  The reason that HHS kept those funds from Treasury is that they clearly saw that they would need every dollar they could get to pay off insurers and keep them from fleeing the system.

And they’re not done yet in trying to find more money for their increasingly reluctant partners in Obamacare crime. Now they want to raid the Treasury yet again to pay insurers through the risk-corridor program – this time through a fund set aside for payments on legal judgments reached on behalf of taxpayers. The Judgment Fund has a theoretically unlimited checkbook, but its scale falls far below what HHS needs to convince insurers to stick around. The Washington Post notes that it has paid out a total of $18 million in the last decade for judgments involving HHS, but now insurers are suing for $2.5 billion in payouts for 2014 alone.

That approach might not last for long. Health-care market analyst Bob Laszewski points out that both the reinsurance and risk-corridor programs only last through 2017. “There can't be such relief in 2017 and years beyond without the Congress and President agreeing to extend the reinsurance program,” Laszewski writes. “In that sense, what the administration apparently wants to do would have a retrospective impact only. It would have no impact on the market that these health plans see for 2017 that has caused them to give big rate increases or to exit the exchanges altogether.”

Related: Obamacare’s Death Spiral of Consumer Choice

That assumes, however, that HHS plans to follow the law when it comes to Obamacare. When it comes to taxpayer money and the statutes created by President Obama and his allies, HHS looks less like a responsible government agency and more like a criminal conspiracy operating on behalf of the same insurers that Obama insisted couldn’t be trusted to run their markets themselves. Don’t expect little items like laws to stop them for long.