The General Accounting Office, the government’s non-partisan watchdog agency, issued a ruling today holding that the Obama administration’s diversion of billions of dollars from the United States Treasury to insurers selling individual policies on the ACA Exchanges was illegal. The GAO joins the Congressional Research Service, another non-partisan agency, in finding that these payments, which the Obama administration has insisted are lawful, are in fact completely unauthorized and inappropriate. For what it is worth, the GAO opinion is also largely consistent with views I have expressed on several occasions (here and here).

Here’s what GAO concluded after 12 pages of careful legal analysis about section 1341 of the Affordable Care Act and the behavior of Health and Human Services (HHS):

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.

The GAO ruling could result in yet more trouble for insurer’s selling policies on the Exchange and criminal investigations of those who authorized the illegal payments. The Obama administration has already spent $16.2 billion on the program for 2014 and 2015 and another $5 billion is scheduled to be spent in 2016, at which point the program is supposed to expire. Of the money spent thus far, only $500 million (3.1%) has been sent to the Treasury; 96.9% has been sent to insurers. Under the GAO’s interpretation of the law (section 1341 of the Affordable Care Act), no matter what amount the government collected for this program, 20% of the total belongs to the Treasury. The GAO found that the language of the statute was crystal clear and that the Obama administration’s efforts to get around that language were “unpersuasive” and “internally inconsistent.” (That’s legalese for nonsense). Thus, insurers may have an obligation to return $2.74 billion to the federal government for 2014 and 2015. That’s about 17.4% of what insurers received during that time frame. Moreover, insurers may be getting considerably less than they hoped for in 2016.

Getting the Money Back

To the extent insurers have to give money back, three things can be said. First, a reimbursement requirement (which could be met partly by withholding any 2016 reinsurance obligations until the repayment obligation was met) will genuinely hurt insurers already struggling with the ACA. Insurers collected roughly $92 billion in premiums in 2014 and 2015 for policies sold in the individual market on the Exchanges. Most lost a good deal of money even without any reimbursement obligation. On average, reinsurance payments amount to about 20.2% of premium revenue for 2014. So, if each insurer has to refund 17.4% of their reinsurance money, that will mean a loss of roughly 3.5% of their premiums for 2014. For 2015, it looks like reinsurance payments will have been about 13% of premium revenues, so a 17.4% refund obligation means a 2.3% hit on premiums for that year. For both years, that’s a significant hit for insurers, many of whom are already unhappy and struggling with the ACA.

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Excuse me for laughing my ass off but when this piece of shit legislation was being 'discussed' I along with many many others said it wouldn't work. In fact, this is the VERY subject that got my posting privileges taken away at DKRAP. But I was already doomed anyway. I said bad (but TRUE) things about their Poster Boy and the just couldn't deal with it so I had to be a RACISSSSSSSTT.

Hats off to Jame Hamsher and Slinkerwink (I believe that was her DKRAP handle). They tried to warn everyone but they were all to enamored of old President Hopey-Changey.

EDIT: Link

If this damn link doesn't post this time I'm gonna be really upset