Obamacare: the Bad and the…Illegal?

CPI Staff — Thursday, August 3, 2017

Though they promised to repeal it “root and branch” if voters just gave them the majority, congressional Republicans have failed, again, to muster the votes for Obamacare repeal.

So what’s next?

Notable author and former staffer to President Ronald Reagan, Don Devine, points out that the White House can act on some issues unilaterally. He lists a few options in his recent piece: stop enforcing the individual mandate, block cost-sharing subsidies, and encourage HHS to devolve regulatory authority to the states, among them. (Of note, over at The Federalist, Chris Jacobs takes issue with the idea that the President can simply stop enforcing the individual mandate.)

White House action on Obamacare does not replace the need for Congressional action. Indeed, the White House cannot, itself, repeal Obamacare.

It does, however, raise three critical issues which neither Congress nor the White House have addressed. In particular, the cost-sharing reduction payments, the Obamacare subsidies provided to members of Congress and their staff, and reinsurance money funneled from the US Treasury to health insurers.

These are three interesting issues for one reason: they’re all illegal.

Let’s take them one by one.

First, cost-sharing reduction (CSR) payments. Currently, CSRs subsidize already discounted co-payments and deductibles for low-income individuals. However, Obamacare didn’t actually include an appropriation (an authorization to spend money) for these payments. President Obama simply made one up. In doing so, he violated the constitutional separation of powers. Only Congress – not the President – can authorize the expenditure of funds. These CSR payments continue to exist in violation of the law, and the Constitution, as both a civil and criminal offense.

In 2014, the House of Representatives filed a lawsuit, claiming that the President did not have the authority to impose these payments (which now total around $8 billion). Lower courts ruled in favor of the House’s arguments, but the case continues to languish on appeal.

Despite their obvious illegality, one of the latest health care reform proposals to emerge in the House of Representatives keeps the CSRs in place.

Second, the health care subsidies paid to Members and staff. When Congress passed Obamacare, it did so with an amendment by Senator Chuck Grassley (R-IA) directing Congress to live under the law as well. Like every other American, Members and staff would have to purchase their plans off the individual health care exchanges – and pay the full premiums associated with it.

However, that’s not exactly how it was implemented.

Instead, the Obama Office of Personnel Management, with buy-in from House and Senate leadership, designated Congress as a small business. This way, Members and staff could buy their plans from the small business exchange and – critically – be eligible for a generous government subsidy, worth about $5,000 for an individual, and $12,000 for a family.

Former Senator David Vitter (R-LA) and now Senator Ron Johnson (R-WI) have both tried to end what they call these unfair and illegal subsidies, to no avail. The White House has threatened to address them, but has yet to take action.

Third and finally, the reinsurance payments made to insurance companies. Reinsurance payments are designed to subsidize insurers for covering the very sick. Under the law, the government is allowed to make these payments via a tax on employers – but only after $5 billion of the amount collected is directed to the US Treasury.

However, when the tax generated less money than anticipated, the Obama administration simply ignored the requirement to pay the Treasury and instead diverted that money to insurance companies. In September 2016, both the Government Accountability Office and the Congressional Research Service found the Obama administration’s actions violated the law, to the tune of nearly $3 billion.

Insurers have, thus far, kept the money, and no one seems particularly motivated to get it back. Ironically, the same House proposal that keeps the illegal CSRs in place also advocates for maintaining the illegal reinsurance policy as well.

Obamacare is obviously bigger than these three issues. However, they stand out one two fronts: their glaring illegality, and the fact that they continue to remain in place.

Though GOP leaders want to move on to other issues, the pressing need to address Obamacare remains. The law is not just a blatant policy failure, it’s a mockery of the rule of law itself.