Government Watch

Will HHS Get Away With A $3.5 Billion Heist?

health-insurance-moneyBy Doug Badger

The Department of Health and Human Services (HHS) announced Friday night that it was in the process of shorting the U.S. Treasury $3.5 billion.

Well, they didn’t exactly announce it. You had to read between the lines.

The theft of $3.5 billion will help prop up insurers that have agreed to sell Obamacare policies in the individual market. Behind all the happy talk from Administration officials about the program’s success lies an unpleasant truth: insurers that participate in Obamacare exchanges are bleeding money.

Those losses are coming despite billions of dollars in handouts the government is providing the industry. Some of those handouts are entirely lawful; others, not so much.

The so-called “reinsurance” program falls into the latter category. Under this program, nearly every man, woman and child with health insurance is quietly being taxed a total of $107 in 2015 and 2016. For a family of four, that tax amounts to $428.

The tax isn’t reported on your W-2 because, the government reasons, it is not a tax.  It is a contribution you’re required to make—or, more accurately, that your employer or insurer is obliged to make on your behalf—to help insurance companies that sell Obamacare policies 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.

Last year, these assessments were supposed to raise $12 billion. Of that sum, HHS was required to remit $2 billion to the U.S. Treasury, leaving $10 billion to be distributed to companies selling Obamacare policies. But the assessments you paid only raised a bit less than $10 billion, more than $2 billion short of the total.

What to do? The Obamacare statute itself answers that question plainly and unambiguously: pay Treasury its $2 billion first, then dole out the rest to insurance companies (section 1341(b)(4)).

But in a remarkable post that appeared last month on the Forbes website, University of Houston professor Seth Chandler wrote about the astounding decision HHS made: in defiance of the Obamacare statute, it would stiff the U.S. Treasury.

All of the money would be distributed to health insurance issuers that sold Obamacare policies in the individual market. The Treasury would not receive a dime.  Almost no one—
save for Chandler—noticed.

Having gotten away with the heist last year, CMS doubled down. It announced on February 12 that it would filch an additional $1.5 billion from the Treasury this year, bringing the two-year total to $3.5 billion.

And they just might get away with it. The issue is obscure enough, complicated enough and important enough to Obamacare’s survival that the agency will likely stand its ground even if Congress were to call it out.

None of the obvious remedies available to HHS are palatable. The agency could reverse course and obey the law, but that would be disastrous for insurance companies. This year’s assessments are expected to total $6.5 billion, according to the February 12 announcement. Paying Treasury the $3.5 billion the law requires would mean shorting insurers by that amount. Most of those companies have been absorbing losses selling an unappealing product, losses that are piling up despite billions in government handouts. If HHS were to pay them less than it has promised, many might decide to stop selling on the exchanges, a political outcome unacceptable to the Administration.

Alternatively, they could increase the assessments on you. You haven’t noticed them so far (neither the government nor your employer has told you about them), so would you really notice if HHS were to increase them? The problem is that organized labor is very much aware of them.  They have long objected to the assessments, which adversely affect their members. They surely would object were HHS to meet its legal obligations by hiking the amount it takes from group health plans.

The Administration is no more likely to snub the unions than it is to stint on payments to insurance companies. So HHS can be expected to continue to defy the law.

Congress could, of course, call attention to this heist. So could presidential candidates. Marco Rubio took a leadership role in clamping down on a separate Obamacare bailout scheme a few years back.

He and his rivals might want to take a careful look at this one as well.

Badger is a former White House and U.S. Senate policy adviser and is a senior fellow at the Galen Institute.  He can be reached at [email protected].

Posted on aBriefCase, February 18, 2016. 

Please visit us at ObamaCareWatch.orgOur focus is on news from the pro-market side of the ObamaCare debat

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Ruel D
7 years ago

The saddest part of all this is that the vast majority of American people knew this was a bad idea and did not want it. We made those feelings quite clear and were ignored. The vast majority of Americans knew that bringing in hundreds of thousands of Middle Eastern “refugees” was a bad idea and we have been worse than ignored. How many days prior to the Paris tragedy did Mr. Obama make the crass and insulting remark, asking the American citizen why he or she was so afraid of women and children? Then came mass murder and mass rape in Europe. A significant majority of Americans do not want the government to control our access to weapons, yet the government doubles down in its efforts to do so. We hand our government far too much of our hard earned paychecks, and yet they demand more. By the weakest estimate, we work one out of every four days for the federal government: those of us that work. A sizable chunk of our population works only one day every two years, when they go to their local voting booth and pull the correct lever. The rest of their time is their own, supported by the dole, the fruits of our hard labor. What do you call a government that is completely unresponsive to the wants and needs of its citizens? What do you call a government that has grown so fat and arrogant, that its President can utter the statement that we didn’t build our businesses, the government did when it built the road out in front of our business? You call it a Socialist Dictatorship. PaulE is correct, our way of life depends on the next election. Anyone who does not monitor the campaigns to discern which candidate will help most or, worse, sits idly at home on election day is our Judas Goat, leading us into the pen for slaughter.

7 years ago

Oops a small typo on my part. Nancy Pelosi actually said “You have to pass it to know what’s in it.” No big deal.

7 years ago

The “reinsurance” provision was part of the original Obamacare law enacted in 2010. This is NOT new news or it shouldn’t be if anyone actually bothered to read what Obamacare entailed in the over five years since Obamacare was passed. It was included in the legislation as a federal subsidy to the insurance companies as a carrot to buy their support for Obamacare and as a means to ensure, at least for the first few years of Obamacare, and offset any losses the insurance companies might suffer as a result of having to only sell these deeply flawed healthcare insurance policies. Please no comments about referring to Nancy Pelosi saying “You have to read it to know what’s in it”. While she actually did say it, all the Democrats knew exactly what was in the bill before they voted for it. Anyone who thinks otherwise is deluding themselves. Obamacare is merely the compilation of almost every wish list policy item, related to the nationalization of the healthcare sector, that Democrats had compiled since the early part of 20th century. It was just the American people who were kept in the dark about the detailed specifics of Obamacare until the bill was passed. It’s been over five years since then, so just about anyone with any actual interest in what was part of Obamacare has had ample time to review the details. So referring to Nancy Pelosi’s line, that is over five years old at this point, should only be relevant to someone who has been frankly living in a cave or marooned on a desert island for the last five plus years.

What the American people should be aware of and that this article doesn’t touch on is that the “reinsurance” program is scheduled to phase out in a few years. This was designed to be short-term, interim program until Obamacare was “up to speed” as the Democrats had originally hoped. Of course like all Democrat social engineering projects, things never work as they planned or budgeted for. That means that the billions of dollars being funneled to the various insurance companies still choosing to participate in this fiasco, to offset their actual loses they’re experiencing for selling Obamacare policies, will have to be made up by the American people in the form of both higher monthly Obamacare insurance premiums and yes also higher deductibles. Yes folks, this means yet another upcoming series of price hikes to an already excessively expensive and poorly designed healthcare insurance program.

Vote like your lives depend on it this November, because it literally does. Enjoy the weekend.

Ivan Berry
7 years ago
Reply to  PaulE

And PaulE, at the time either the insurance companies or the overcharged insured holler “calf rope, it ain’t working,” the answer from government will, as previously planned, be to instantly shift to “single payer,” a totally government funded (or mis-funded) health care program.
Anyone who has been around for awhile should realize that insurance companies cannot insure for prior illness without surcharges to the higher risk risk pools. The government bribes to the companies who went along were never meant to be permanent IMHP.

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