The Obama administration didn’t have the authority to divert billions of dollars from the Treasury Department to insurers, a legal opinion from a federal watchdog concluded.
The Government Accountability Office opinion issued Thursday said the administration doesn’t have the authority to divert $3.5 billion from the Treasury Department to Obamacare insurers. Congressional Republicans requested the legal opinion, saying that the Department of Health and Human Services is violating the clear intent of the Affordable Care Act.
The opinion focuses on Obamacare’s reinsurance program, which collects money from insurers and uses it to offset claims from the sickest patients. The goal of the program, which expires after this year, is to help insurers mitigate the newly created Obamacare marketplaces.
Republicans have argued that $3.5 billion in reinsurance payments was supposed to go to the Treasury Department, but instead was delivered to insurers. It asked the GAO to deliver a legal opinion on whether HHS could bypass sending the money to Treasury.
The GAO found that HHS has to deposit money collected from insurers to the Treasury. It didn’t agree with HHS’ opinion that it had to deposit money only if it reached a certain amount.
“This prioritization of collections for payments to issuers over payments to the Treasury is not authorized,” GAO said.
The Affordable Care Act specified that HHS had to collect a certain amount of reinsurance payments from insurers for each year starting in 2014, the first year Obamacare’s marketplaces went online.
In 2014, HHS was supposed to collect $10 billion, in 2015 $6 billion and $4 billion in 2016. In addition, HHS was supposed to give Treasury $2 billion in 2014, $2 billion in 2015 and $1 billion in 2016.
HHS found that its total collections could fall short due to uncertainty in the estimates of reinsurance payments. HHS initially planned to allocate 83.2 percent of its collections from insurers to go toward reinsurance payments, 16.6 percent to Treasury and another 0.2 percent to administrative costs.
However, in March 2014 the agency changed course and decided that it would allocate all collections first to insurers and would give the Treasury money only once collections reach a certain amount.
In 2014, HHS collected $9.7 billion in reinsurance payments from insurers.
“HHS did not allocate any collections to the Treasury or to administrative expenses,” the GAO said. “Because the agency collected less than the $10 billion target for reinsurance payments, it allocated all of its collections for those [insurer] payments.”
For the 2015 benefit year, the agency expects to collect $6.5 billion by the end of this year. That is below the projected collection of $8 billion.
The GAO said that it looked at the statutory language of the law to determine if HHS could bypass sending the payments to Treasury.
The watchdog said that under the language of the law, HHS has to deposit the reinsurance money to the Treasury.
“The fact that HHS’s collections ultimately fell short of the projected amounts does not alter the meaning of the statute,” GAO said.
It found that the roughly $3 billion collected as of July 2016 must be deposited in the Treasury.
HHS responded to the watchdog by saying that the statute does not say “how contributions are to be allocated if the total amount collected is insufficient to meet the statutory targets,” the legal opinion said.
But GAO didn’t buy that argument. It said that the statute’s language plainly says Treasury needs to get the reinsurance funding.
GAO said that HHS couldn’t use amounts collected for the Treasury to make reinsurance payments to insurers.
Congressional Republicans pounced on the legal opinion.
“This is about fairness and respect for the rule of law clearly anchored in the constitution,” a statement from seven committee leaders in the House and Senate. “The facts are simple — the Constitution is on our side.”
HHS did not immediately return a request for comment.
