When is a government program not a government program?
When the insurance industry says it isn’t.
In its effort to keep billions in unlawful ObamaCare corporate subsidies flowing, the industry is trying to persuade Congress that it receives no federal funds through the federal “reinsurance” program. Good luck with that.
The ObamaCare statute established the temporary, three-year (from 2014 to 2016) reinsurance program for two purposes: 1) to provide $5 billion to the Treasury; and 2) to provide $20 billion to issuers of individual ObamaCare policies.
To fund it, the Centers for Medicare and Medicaid Services (CMS) levied a stealth tax that affected most people with private health insurance coverage. Revenues from this levy have disappointed: They fell $3.5 billion short of projections over the first two years.
Faced with this shortfall, the agency decided to swindle the Treasury out of $3.5 billion and distribute that money instead to insurers. If its 2016 collections again don’t reach the targeted amount, CMS could divert another $1 billion from Treasury to insurers. The three-year heist could total $4.5 billion.
CMS’s action is unlawful and blatantly so. The nonpartisan Congressional Research Service (CRS) has concluded that CMS’s diversion of funds “appear[s] to be in conflict with the plain reading of [the statute].”
CRS went further. Under the Supreme Court’s Chevron U.S.A. v. Natural Resources Defense Council doctrine, courts generally defer to an agency’s statutory interpretation where the law is ambiguous. But such “Chevron deference” cannot be used to defend the reinsurance heist, according to CRS. “A contrary agency interpretation would not be entitled to deference underChevron,” CRS concluded.
The law, in the view of CRS and other legal experts, is unambiguous and clear: The agency must remit the money to Treasury.
The insurance industry is nevertheless eager to keep the stolen government cash rolling in. To defend its indefensible position, the industry asks Congress to believe a bit of a whopper: The billions diverted from Treasury are not federal funds, since the reinsurance program is fully funded by collections from the private sector.
Of course, all federal spending is fully funded by the private sector. Government takes money from some and distributes it to others. In this case, the collections come largely from group health plans, which were established to provide benefits to workers and their families. The government takes money from these plans (to the detriment of families the plans were established to benefit) and gives it to insurers that sell individual policies in the exchanges.
Reinsurance is thus a government transfer program that provides federal subsidies to government-favored corporations, largely at the expense of tens of millions of people with job-based health coverage.
Fair enough. ObamaCare is best understood as a program in which government redistributes money and resources from some individuals and corporations to others. That is the law in a nutshell.
The catch is that CMS has broken the law by giving insurers billions of dollars that it was required to remit to Treasury.
Yet despite pocketing money to which it is not legally entitled, the industry claims it’s been cheated. Had CMS collected the full $20 billion ($12 billion for 2014 and $8 billion for 2015) over the program’s first two years, insurers would have received $16 billion and the Treasury $4 billion. Instead, Treasury is to be paid only $500 million, while insurers will have to make due with a mere $15.6 billion — 98 percent of what they would have received had collections not fallen billions short. Hardly grounds for complaint.
Insurers also argue that they set their premiums in anticipation of unlawful reinsurance payments. Those expectations, however, don’t create a right to receive money unlawfully diverted from Treasury. Mommy may have promised you a pony, but that doesn’t entitle you to a stolen horse.
Insurers neglect to mention that CMS repeatedly changed the reinsurance formula to the industry’s benefit. A study published by the Commonwealth Fund found that the 2014 reinsurance payments were 50 percent higher than insurers expected when they set their premiums. So federal reinsurance payments, far from falling short of industry expectations, actually exceeded them in 2014.
Despite this unexpected and unlawful federal generosity, insurers are losing money by the truckload in the ObamaCare individual “markets.”
Like others in the healthcare industry, insurers backed ObamaCare in hopes of booking billions in new profits. While hospitals and drug companies have done just fine by the law, insurers are taking a bath.
Which brings us to the law’s real problem. ObamaCare isn’t failing because the government has been stingy with corporate handouts; its largesse, in fact, has transgressed legal bounds. The program is failing because its Byzantine redistribution scheme doesn’t work in the real world.
It’s not insurers’ fault that the law is poorly conceived, incompetently written, lawlessly administered and utterly unworkable. Insurers are just trying to make a buck and curry favor with an administration committed to the hallucination that all is well with ObamaCare.
It is nonetheless painful to watch large and well-financed corporations grasp after unlawful federal reinsurance subsidies and sue the government for risk corridor money that Congress has prohibited from being spent.
Insurers recognize better than most that corporate subsidies — legal and otherwise — won’t fix a broken program.
Instead of begging Congress, the White House and the courts for more federal handouts, the industry should work with responsible members of both parties to rewrite this dreadful law.