The Department of Health and Human Services lacks the authority to bail out insurers through the transitional reinsurance program with taxpayer funds that were meant to go to the U.S. Treasury, according to a report from the Government Accountability Office.
The Affordable Care Act established the transitional reinsurance program for three years from 2014 to 2016, which was designed to pay insurers for a portion of the cost of high-cost enrollees.
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The program designated a target amount for reinsurance payments as well as a specified amount that must go in the general fund of the United States Treasury under section 1341 of the law. In 2014, the law targeted collections of $10 billion for reinsurance payments and $2 billion for the Treasury.
"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," the Government Accountability Office said. "Because the agency collected less than the $10 billion target for reinsurance payments, it allocated all of its collections for those payments."
"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," the report states. "As a result, HHS did not deposit any amounts collected from issuers into the Treasury."
Members of Congress asked the Government Accountability Office to review the agency’s actions to see whether it has the authority to prioritize payments to failing issuers over payments to the Treasury if the collections do not hit the specified amount.
"In light of the foregoing analysis, we conclude that HHS lacks authority to ignore the statute’s directive to deposit amounts from collections under the transitional reinsurance program to the Treasury and instead make deposits in the Treasury only if its collections reach the amounts for reinsurance payments specified in section 1341," the Government Accountability Office said. "The agency is not authorized to prioritize collections in this manner."
"The agency’s view, which appears to be that it does not—and is not required to—collect amounts for the Treasury under section 1341 until contributions for reinsurance payments reach the statutory target, is undermined by its own rules and regulations," they said. "The agency impermissibly chose to interpret the statute in a manner that ignored the statutory requirement to collect funds for the Treasury."
"An independent watchdog has confirmed what we’ve been saying all along, which is that the Obama administration is illegally putting insurance companies ahead of hardworking taxpayers in order to try to save its legacy and artificially prop up its failing health care law," said Freedom Partners senior policy adviser Nathan Nascimento. "Now that the GAO has weighed in, Congress must keep up the pressure to recoup the billions of dollars that are owed to taxpayers, and prevent the administration from trying other backdoor efforts to bail out insurers through the ACA’s Risk Corridor Program."
The Department of Health and Human Services did not respond to requests for comment by press time.