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Obama Breaks His Own Rules To Bail Out Insurance Companies

- September 29, 2016

GAO Report On Obama Administration Making Improper Payments To ObamaCare Insurers Comes On The Heals Of Co-Op Failures And Insurers Exiting The Marketplace

TOP TAKEAWAYS

  • A new Government Accountability Office report out today finds that the Obama administration has been making payments to struggling ObamaCare insurers in violation of the law.
  • ObamaCare is causing insurers to lose money and pull out of the exchanges.
  • The remaining insurers are passing costs onto consumers.
  • The Co-Op program has failed indicating that the public option would also be doomed.

Today, The Government Accountability Office (GAO) Released A Report Requested By Congress Regarding The Misappropriations Of ObamaCare Funds. "This responds to your April 13, 2016 request for our opinion regarding the Department of Health and Human Services' (HHS) administration of the transitional reinsurance program established under section 1341 of the Patient Protection and Affordable Care Act (PPACA). The transitional reinsurance program, which is financed by statutorily required contributions from participating health insurance issuers and group health plans (issuers), makes payments to eligible issuers to stabilize health insurance premiums and encourage issuer participation in the health insurance markets. Section 1341 designates a specified amount of collections from issuers for reinsurance payments and also directs the deposit of a specified amount of collections in the general fund of the United States Treasury (Treasury). You asked whether HHS has the authority, in the event its collections from issuers do not reach the specified amount for reinsurance payments, to prioritize collections for payments to issuers over payments to the Treasury." ("Department of Health and Human Services: Transitional Reinsurance Program," Government Accountability Office , 9/29/16)

The new gao Report Shows The Obama Administration Is VIOLATING The Law To Prop Up ObamaCare

The Report Determined That Health And Human Services (HHS) Was Appropriating Funds To Insurers Struggling Due To ObamaCare Instead Of Fulfilling Legal Obligations To The Department Of Treasury , Despite Not Having 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." ("Department of Health and Human Services: Transitional Reinsurance Program," Government Accountability Office , 9/29/16)

  • The Report Found That HHS Was Withholding Funds From The Department Of Treasury In An Effort To Stabilize Premiums. "Lastly, HHS's position selectively ignores one of the statute's purposes-which is collecting funds for the Treasury-giving effect to only one of the statute's purposes-stabilization of health insurance premiums. Specifically, in support of its decision to prioritize collections for reinsurance payments, the agency noted that prioritizing the allocation of reinsurance contributions to the reinsurance payment pool 'furthers the statutory goals of the program by bringing more certainty to the individual market and helping moderate future premium increases.' The agency also noted that, given uncertainty in its own estimates and whether they would produce collections meeting the targets in section 1341(b), its prioritization of collections for reinsurance payments would 'help assure that the reinsurance payment pool is sufficient to provide the premium stabilization benefits intended by the statute.'" ("Department of Health and Human Services: Transitional Reinsurance Program," Government Accountability Office , 9/29/16)

The GAO Analysis Of The Program Found That HHS Was Required To Collect Funds For The Department Of Treasury Without Qualification. "By their plain terms, the provisions of section 1341 require HHS to collect amounts for the Treasury and do so without qualification. Specifically, the statute requires the Secretary to design a method to collect contribution amounts from each issuer that in total results in the collection of the amounts specified in sections 1341(b)(3)(B)(iii) and (iv)-the reinsurance amounts and the Treasury amounts." ("Department of Health and Human Services: Transitional Reinsurance Program," Government Accountability Office , 9/29/16)

  • The Program Also Requires HHS To Deposit Funds Collected For The Treasury To The Treasury, Explicitly Limiting The Authority Of The Agency To Pay ObamaCare Insurers. "However, the second sentence of paragraph (4) (which begins, 'Notwithstanding the preceding sentence . . .') explicitly limits the agency's authority to use amounts collected for the Treasury under section 1341(b)(3)(B)(iv) to make reinsurance payments in any year. Instead, the sentence very clearly directs the agency to deposit amounts collected under section 1341(b)(3)(B)(iv) in the Treasury." ("Department of Health and Human Services: Transitional Reinsurance Program," Government Accountability Office , 9/29/16))

The GAO Report Concludes That The HHS Is Wrongfully Abdicating Their Responsibilities To Pay The Department Of Treasury. "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 agency is not authorized to prioritize collections in this manner. The agency must give effect to the extent possible to all of section 1341, and, to do so, 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. HHS may not use amounts collected for the Treasury to make reinsurance payments." ("Department of Health and Human Services: Transitional Reinsurance Program," Government Accountability Office , 9/29/16)

The GAO Found That HHS Unilaterally Changed Its Payment Mandates Resulting In An Illegal Payment Scheme That Favors ObamaCare Insurers

In March Of 2014, Health And Human Services (HHS) Announced That It Would Change Its Payment Methods And Pay Struggling Insurers Instead Of The Justice Department. "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." It announced that it would allocate all collections first for reinsurance payments until collections totaled the target amount set forth for reinsurance payments in section 1341(b)(3)(B)(iii) for each benefit year. Any remaining collections up to the projected collection totals would be allocated to administrative expenses and the Treasury on a pro rata basis." ("Department of Health and Human Services: Transitional Reinsurance Program," Government Accountability Office , 9/29/16)

The GAO Report Found That HHS Is Not Following The Law And Is Unfairly Paying ObamaCare Insurers Instead Of The Department Of Treasury. "In this respect, HHS's position regarding prioritization of collections for reinsurance payments appears to be driven solely by the factual circumstances present here, namely, lower than expected collections. However, a funding shortfall does not give an agency 'a hinge for enlarging its discretion to decide which [priorities] to fund.' To the contrary, as discussed above, the agency's obligation under such circumstances is to give maximum effect to the original statutory scheme and allocate funds as closely as possible to the 'plan Congress designed in anticipation of full funding.' HHS currently intends to allocate all collections to reinsurance payments until collections reach the statutory targets for these payments. Our conclusion that reinsurance payments and Treasury deposits are both required under section 1341 supports instead a pro rata distribution of all collections between the two." ("Department of Health and Human Services: Transitional Reinsurance Program," Government Accountability Office , 9/29/16)

HHS Is On Pace To Wrongfully Withhold Up To $5 Billion From The Department Of Treasury To Cover Last Year

Based On Current Projections For Benefit Year 2015, HHS Is Scheduled To Again Deposit $0 To The Department Of Treasury Due To Revenue Issues. "For benefit year 2015, the agency expects to collect a total of $6.5 billion by the end of calendar year 2016, less than its projected collection of $8.025 billion." ("Department of Health and Human Services: Transitional Reinsurance Program," Government Accountability Office , 9/29/16)

HHS Was Originally Mandated To Pay The Department Of Treasury $4 Billion For Benefit Years 2014 And 2015. "The law specifies collections of $10 billion for 2014, $6 billion for 2015, and $4 billion for 2016, for reinsurance purposes, and an additional $2 billion for 2014, $2 billion for 2015, and $1 billion for 2016, for the Treasury." ("Department of Health and Human Services: Transitional Reinsurance Program," Government Accountability Office , 9/29/16)

HHS's Change To The Implementation Of The Law Due To Struggling ObamaCare Insurers Resulted In The Department Of Treasury Collecting $0 In 2014 Revenue From The Program. "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.14 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. As a result, HHS did not deposit any amounts collected from issuers into the Treasury." ("Department of Health and Human Services: Transitional Reinsurance Program," Government Accountability Office , 9/29/16)

It's No wonder HHS Had To Violate The law, ObamaCare Is CAUSING INSURERS TO LOSE MONEY AND PULL OUT OF THE EXCHANGES

With Losses Piling Up, Large Insurers Are Leaving ObamaCare Exchanges In Droves. "With the fourth open-enrollment period set to begin this fall for the marketplaces set up by the Affordable Care Act, it's becoming clear that the market for health insurance has not evolved as expected, or hoped. The market is smaller than projected. The people who have bought health plans overall are sicker than predicted. And health insurers have incurred larger losses than anticipated. As a result, some large national insurance companies, including UnitedHealthcare, Humana and Aetna, plan to abandon markets across the country next year." (Guy Boulton, "Health Insurers Eye Steep Increases," Milwaukee Journal Sentinel , 8/24/16)

According To A New Commonwealth Fund Report, Financial Impact Of ObamaCare Is Forcing Insurers To Withdraw From ACA's Exchange Markets. "Recently, however, we are hearing more troubling financial news from health insurers in the individual market. Premium rates have increased more than expected. Several newly established insurers that focused on the individual market have failed or are in financial distress. And the nation's largest insurer, United Healthcare, announced it would be withdrawing from most of the ACA's exchange markets, based in part on its significant losses." (Mark A. Hall and Michael J. McCue, "Realizing Health Reform's Potential," The Commonwealth Fund , 7/16)

To Maintain Financial Health, Insurers Will Have To Continue To Raise Premiums. "However, improved financial performance will require increased premiums, especially as the ACA's reinsurance component phases out, starting in 2017. This reinsurance has played a crucial role in helping insurers transition. Because this has taken longer than initially expected, policymakers should consider extending the ACA's reinsurance program until the reformed market has matured." (Mark A. Hall and Michael J. McCue, "Realizing Health Reform's Potential," The Commonwealth Fund , 7/16)

A Lack Of Competition Could Affect Millions

According To Cynthia Cox Of Kaiser Health, The Dearth Of Competition Is Leaving Many Counties With Only 1 Potential Insurer. "As a result, the administration's promise of a menu of health-plan choices has been replaced by a grim, though preliminary, forecast: Next year, more than 1 in 4 counties are at risk of having a single insurer on its exchange, said Cynthia Cox, who studies health reform for the Kaiser Family Foundation." (Carolyn Y. Johnson, "Health-Care Exchange Sign-Ups Fall Far Short Of Forecasts," The Washington Post , 8/27/16)

  • New West Health Services Of Montana Also Recently Announced Their Departure From ObamaCare. "Officials for a Montana health insurance company say the company will shut down next year. Ryan O'Connell of New West Health Services said Friday the company will cease operations after it fulfills its requirements for this year's insurance plans. Company CEO Angela Huschka says the company is not able to be financially successful with health insurance industry's increasing complexity and new challenges." ("Montana Insurer To Shut Down In 2017," The Associated Press, 9/25/16)

Potentially 2.3 Million, Or One In Five Marketplace Enrollees, Will Have Just One Insurer To Choose From . "We estimate that 2.3 million marketplace enrollees, or 19% of all enrollees, could have a choice of a single insurer in 2017, which is an increase of 2 million people compared to 2016. Going into marketplace open enrollment in 2016, about 303,000 enrollees (2%) had a single insurer option." (Cynthia Cox And Ashley Semanskee, Preliminary Date on Insurer Exits And Entrants In 2017 Affordable Care Act Marketplaces, Kaiser Family Foundation , 8/28/16)

This Could Mean That More Than 970 Counties Could Be Subjected To No Competition. "Similarly, we estimate that the number of counties with a single marketplace insurer is likely to increase, from 225 (7% of counties) in 2016 to 974 (31% of counties) in 2017. Approximately 6 in 10 counties could have 2 or fewer marketplace insurers in 2017. The bulk of the increase in single-insurer counties is a result of the UnitedHealth exit, as the company was often the second insurer in rural areas." (Cynthia Cox And Ashley Semanskee, Preliminary Date on Insurer Exits And Entrants In 2017 Affordable Care Act Marketplaces, Kaiser Family Foundation , 8/28/16)

Insurers that are staying in the exchanges are passing the cost onto consumers with higher premiums and deductibles

"Significant Spikes In Premiums, Insurer Dropouts And Persistently Low Enrollment Numbers Are Combining To Make This Fall's Sign-Up Period A Crossroads For The Obama Administration's Signature Health Law." (Louise Radnofsky And Stephanie Armour, "U.S. Health Law Faces Critical Year," The Wall Street Journal, 9/7/16)

Increasing Premiums Could Create A "Death Spiral." "Indeed, without better enrollment in private coverage for 2017, premiums will likely rise further and the insurers in the program will find participation even less appealing. Their proposals for increased rates across the country already reflect the assumption that the law's offerings are most attractive to people who are sick and likely to incur large medical claims. Premium increases and limited choice of health plans can themselves impede sign-ups from all but the most desperate, creating a vicious circle sometimes referred to by health-insurance experts more ominously as a 'death spiral.'" (Louise Radnofsky And Stephanie Armour, "U.S. Health Law Faces Critical Year," The Wall Street Journal, 9/7/16)

  • A Death Spiral Becomes More Likely As More Premiums Rise And Insurers Lose Money. "'Are we in an Obamacare 'death spiral?' health insurance consultant Robert Laszewski asked in a Sept. 9 bulletin to clients, where he described the grim scenario. In a death spiral, as options for coverage shrink, insurers attract increasingly sick patients and suffer losses. That forces them to raise rates, driving away healthy, profitable customers. Facing more losses, they raise rates again, causing more healthy people to leave, and so on -- until all that's left are high premiums and a small pool of the unwell." (Tatiana Darie, "Shaky Obamacare Market Adds To 'Death Spiral' Fears," Bloomberg, 9/23/16)

The Associated Press Headline: "Significant Premium Hikes Expected Under Obama Health Law" For 2017. (Ricardo Alonso-Zaldivar and Tom Murphy, "Significant Premium Hikes Expected Under Obama Health Law," The Associated Press , 4/28/16)

  • "Insurers Say The Law's Coverage Has Been A Financial Drain" Setting The Stage For Double Digit Premium Hikes. "Insurers say the law's coverage has been a financial drain for many of them, and they're setting the stage for 2017 hikes that in some cases could reach well into the double digits." (Ricardo Alonso-Zaldivar and Tom Murphy, "Significant Premium Hikes Expected Under Obama Health Law," The Associated Press , 4/28/16)

Premium Increases Have Hurt The Middle Class And Put The Future Of ObamaCare In Question

A Lack Of Competition And Increasing Premiums Has Hurt The Middle Class In Need Of Affordable Healthcare. "The people who bought those health plans also are older and sicker than expected, said Brian Blase, a senior research fellow at the Mercatus Center at George Mason University. Second, the health plans on the marketplaces are relatively expensive for everyone but those with the lowest incomes. 'We are not seeing evidence that the plans are attractive for people with middle-class incomes,' Blase said. The cost has dissuaded healthy people from buying health plans - and healthy people are needed to offset the cost of people who are not." (Guy Boulton, "Health Insurers Eye Steep Increases," The Milwaukee Journal Sentinel , 8/24/16)

Premium Increases Could Substantially Impact As Many As 10 Million People Who Do Not Qualify For Government Subsidies. "The individual market, overhauled under the health law to require insurers to sell to everyone regardless of their health history, is made up of approximately 10 million people who get coverage from HealthCare.gov or a state equivalent, and another group who buy coverage on their own outside the system. People in the first group typically have federally funded subsidies pegged to the cost of coverage that can blunt the impact of premium increases, and stave off a rapid deterioration in enrollment. People who buy coverage on their own outside the site don't, and some estimates put their numbers as roughly similar to those who use HealthCare.gov. This latter group's participation in the market is as critical as people who get subsidies-if not more, because actuaries typically assume that wealthier people enjoy better health." (Louise Radnofsky And Stephanie Armour, "U.S. Health Law Faces Critical Year," The Wall Street Journal, 9/7/16)

Many Are Wondering Whether ObamaCare "Will Go Down As A Failed Experiment." "With the hourglass running out for his administration, President Barack Obama's health care law is struggling in many parts of the country. Double-digit premium increases and exits by big-name insurers have caused some to wonder whether 'Obamacare' will go down as a failed experiment." (Ricardo Alonso-Zaldivar, "Can Clinton Save Health Overhaul From Its Mounting Problems," The Associated Press," 8/28/16)

The co-ops, which were supposed to provide an alternative to the insurance companies are a failure

Co-Ops "Were A Compromise" With Single-Payer Advocates To Garner Support For ObamaCare In The Congress. "When the ACA was enacted in 2010, the Consumer Operated and Oriented Plans were a compromise to appease congressional liberals who had wanted a new public insurance program for Americans unable to get health benefits at work." (Amy Goldstein, "Financial Health Shaky At Many ObamaCare Insurance Co-Ops," The Washington Post , 10/10/15)

Former Health And Human Services Secretary Kathleen Sebelius Viewed Co-Ops As A Substitute For The Public Option During Original ObamaCare Negotiations. "Murmurs from the White House that the government-sponsored public insurance option could be negotiated or even dropped from President Obama's health care reform plan in favor of nonprofit cooperatives has left the medical community abuzz and the public a bit confused. The talk started Saturday after Obama indicated during a town hall meeting in Colorado that publically funded health insurance was not the centerpiece of his reform plan but 'only a sliver' of the solution. And on Sunday, Health and Human Services Secretary Kathleen Sebelius said that co-ops are being considered as an alternative way to fulfill the president's goal of creating more competition in the health insurance industry." (Lauren Cox, "'Public Option Or Co-Op? Experts Sound Off," ABC News, 8/18/09)

  • Sebelius Said That The Public Options And Co-Ops Performed Similar Essential Functions Because They Offered Competition To The Private Market. "Sebelius said the White House would be open to co-ops instead of a government-run public option, a sign Democrats want a compromise so they can declare a victory on the must-win showdown. 'I think there will be a competitor to private insurers,' she said. 'That's really the essential part, is you don't turn over the whole new marketplace to private insurance companies and trust them to do the right thing. We need some choices, we need some competition.'" ("Public Option Up In The Air After Comments," CBS News, 8/16/09)

ObamaCare's Health Co-Ops Are "Collapsing" At A "Rapid Clip." "Health cooperatives are collapsing at such a rapid clip that some co-ops and small insurers are forming a coalition to consider legal action to try to change health-law provisions they blame for their financial distress." (Stephanie Armour, "More Health Co-Ops Face Collapse," The Wall Street Journal, 10/16/15)

17-23 Original ObamaCare Co-Ops Have Now Failed. "The announcement also follows a national pattern of Obamacare co-op failures. Just seven of the 23 co-ops remain, according to a Forbes report in July." (Susan Livio, "Another N.J. insurance company drops out of Obamacare," New Jersey, 9/12/16)

The Failed Co-Ops Have Cost Taxpayers Billions And Has Cost 800,000 People Their Insurance

CMS Administrator Andy Slavitt Was Questioned By Senate Officials On "The Roughly $1.2 Billion In Government Loans That Went To The Failed Co-Ops." "The Senate Finance Committee on Thursday questioned Andy Slavitt, the acting administrator of the Centers for Medicare and Medicaid Services (CMS), about the roughly $1.2 billion in government loans that went to the failed co-ops and why the administration did not pick up on problems sooner." (Peter Sullivan, "Lawmakers Grill Obamacare Official Over Co-Op Failures," The Hill, 1/21/16)

  • Slavitt Said The Administration Was Working To Recover The Loans But Admitted They Did Not Expect To Get All Of The Money Back. "Slavitt said that CMS is working with the Department of Justice on recovering the loans to failed co-ops, but the administration has acknowledged that it will not get all of the money back. Paying the federal government back, as opposed to claims or other expenses, tends to be a low priority for a co-op in receivership." (Peter Sullivan, "Lawmakers Grill Obamacare Official Over Co-Op Failures," The Hill, 1/21/16)

The Co-Op Failures Has Cost 800,000 People Their Insurance. "As concerns about the survival of the Affordable Care Act's markets intensify, the role of nonprofit "co-op" health insurers -- meant to broaden choices under the law -- has gained prominence. Most of the original 23 co-ops have failed, dumping more than 800,000 members back onto the ACA markets over the last two years." (Tatiana Darie, "Shaky Obamacare Market Adds To 'Death Spiral' Fears," Bloomberg, 9/23/16)


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