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GAO: HHS Can't Prioritize Payments to Insurers over Treasury

By Erin Mershon, CQ Roll Call

September 29, 2016 -- A nonpartisan government watchdog concluded that the Obama administration erred in administering a program in the 2010 health law intended to pay both insurers and the Treasury Department by prioritizing insurance companies first.

The legal analysis, released Thursday by Republicans in both chambers that requested it, concluded that the administration acted without proper authority in distributing so-called reinsurance payments, which are designed to redistribute payments from plans that enroll healthier individuals to those that enroll sicker customers.

Under the law, the Department of Health and Human Services (HHS) was supposed to bring in $12 billion in 2014, $8 billion in 2015 and $5 billion in 2016. Insurers would get back $10 billion, $6 billion, and $4 billion in each of those years respectively, with the rest going to the Treasury Department to help fund the health law. But HHS brought in fewer funds than it expected in both 2014 and 2015, and prioritized its payments to insurers. So far, Treasury has received about $500 million.

HHS "lacks authority to ignore the statute's directive," GAO wrote in the legal opinion. "The agency is not authorized to prioritize collections in this manner.  . . .  [It] 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."

Republicans in Congress have hammered the Obama administration over the payments for months, including in a series of hearings this summer and fall. Sens. Mike Enzi, R-Wyo.; Lamar Alexander, R-Tenn.; Orrin Hatch, R-Utah; John Barrasso, R-Wyo.; and Reps. Fred Upton, R-Mich.; Kevin Brady, R-Texas; and Tom Price, R-Ga.; requested the analysis. They chair the committees with jurisdiction over health and budget issues.

Sen. Ben Sasse, R-Neb., has also introduced legislation that would slash the HHS budget in half if the agency doesn't pay the Treasury Department what it is due.

"GAO's new legal opinion is simple: the law is the law and HHS broke it," Sasse said in a release. "Washington has been running a textbook, crony scheme: cutting checks to big insurance companies that can afford lobbyists instead of giving taxpayers the $5 billion they're owed."

The administration, for its part, has said that it provided proper notice of how it planned to distribute the payments and received no comments, from lawmakers or others, suggesting it lacked the authority.

The reinsurance program, which will sunset this year, is funded by all health insurance companies, including those sold off the exchange and self-insured plans.

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