GAO report: HHS owes taxpayers billions in Obamacare reinsurance money

The Government Accountability Office has issued a report which concludes the Department of Health and Human Services had no authority to withhold money from the federal Treasury under Obamacare’s reinsurance program. Politico reports:


In 2014, the industry-funded reinsurance program was supposed to provide $10 billion to insurers and $2 billion to the federal Treasury. But when total collections from insurers amounted to only $9.7 billion, the Department of Health and Human Services opted to funnel all of the money toward insurers. The agency paid insurers $7.9 billion in claims for 2014, the first year of exchange coverage, and held over the remaining $1.7 billion for future payments.

Republicans asked the GAO to weigh in on whether or not HHS had the authority to interpret section 1341 of Obamacare in such a way that it could withhold payments to the Treasury. The GAO report concludes HHS clearly does not have the authority to do so:

As explained below, we conclude that HHS lacks authority to ignore the statute’s directive to deposit amounts from collections under the transitional reinsurance program in the Treasury and instead make deposits to the Treasury only if its collections reach the amounts for reinsurance payments specified in section 1341. This prioritization of collections for payments to issuers over payments to the Treasury is not authorized. The agency must give effect to the extent possible to all of section 1341, and, therefore, is required to collect and deposit amounts for the Treasury, regardless of whether its collections fall short of the amounts specified in statute for reinsurance payments.

There is a long section of the report which analyzes the language of section 1341. I won’t try to summarize that here but suffice it to say the GAO does not see this as a close call:


We do not see any flexibility under section 1341(b)(4) to allow HHS to expend the pro rata share of collections attributable to the Treasury under section 1341(b)(3)(B)(iv)—approximately $3 billion as of July 2016—to make reinsurance payments. Instead, these collections must be deposited in the Treasury.

The GAO report notes that even HHS initially agreed with this reading of the law. It announced as late as 2014 that, in case of a shortfall, it would make payments to insurers and the Treasury on a pro rata basis:

For example, in the event of a shortfall for benefit year 2014, the agency indicated it would allocate 83.2 percent of collections to reinsurance payments, 16.6 percent to the Treasury, and 0.2 percent to administrative expenses.

On March 21, 2014, however, HHS changed course, citing uncertainty in the estimates used to develop the contribution rate and further considering “the authority granted to [it] to establish standards necessary to implement the program.”

What it eventually did was pay nothing to the Treasury, even choosing to sit on $1.7 billion that it had left over after paying off insurers.

This is probably not the kind of story that is going to lead the evening news but it really should. What the Obama administration has done here is take $3 billion dollars of taxpayer money and direct it to private insurers in an effort to prop up its struggling health insurance scheme.

Just to put this in perspective, there have been weeks of stories about the scandal of phony accounts at Wells Fargo bank. That’s a legitimate scandal in which bank employees created millions of unauthorized new accounts (and credit cards) in order to secure bonuses for themselves. However, the total amount set aside for refunds in that case was $5 million dollars. That’s apparently how much customers were ripped off by the shady practices at Wells Fargo. For this legitimate scandal, Wells Fargo is paying over $150 million in fines and has already fired over 5,000 employees.


Meanwhile, the Obama administration withheld $3 billion dollars belonging to taxpayers and essentially redirected it to private companies. It has not paid back the money. It has not been punished for taking it without authorization. No one at HHS has been fired. And Elizabeth Warren is not demanding HHS Secretary Burwell resign.

Will there be any accountability for HHS and the Obama administration for what amounts to the intentional misdirection of billions of taxpayer dollars to the president’s pet project? Will the media devote 1/4 of the attention to this that it has to the Wells Fargo story? We shall see but my advice is don’t hold your breath waiting for it to happen.

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