GAO Finds Misuse of ACA Reinsurance Fees

The watchdog says the Obama administration violated the ACA by allocating all the fees to insurers and none to the Treasury Department.
Matthew HellerOctober 3, 2016

The Obama administration is illegally depriving taxpayers of their share of billions of dollars in reinsurance fees collected from Affordable Care Act health plans, according to the Government Accountability Office.

The Obamacare reinsurance program was intended to stabilize premiums in the first three years of the law, with $10 billion to be collected for the 2014 benefit year and allocated to plans with high-cost enrollees. Another $2 billion would go to the Treasury Department.

But after collections fell short of the target amount in 2014, the Department of Health and Human Services did not allocate any money to Treasury, triggering complaints from Congressional Republicans that the Obama administration was improperly trying to prop up the healthcare law.

In a legal opinion, the GAO gave the critics some ammunition, finding that the “prioritization of collections for payments to [insurers] over payments to the Treasury is not authorized” under the ACA.

HHS “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,” the opinion concluded.

An HHS spokesman said the administration had “implemented the Transitional Reinsurance Program lawfully and in a transparent manner, and strongly disagrees with today’s GAO opinion. This critical program, which expires this year, helps to reduce premiums for consumers.”

Reinsurance collections for 2014 totaled $9.7 billion, from which HHS paid $7.9 billion in reinsurance claims and paid these in full. It carried over the remainder for reinsurance payments in subsequent years.

The administration argued that the shift of funds to insurers “furthers the statutory goals of the [reinsurance] program by bringing more certainty to the individual market and helping moderate future premium increase.”

But the GAO said 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.”

For the 2015 benefit year, the agency expects to collect a total of $6.5 billion, below its projected amount of $8.025 billion.