A Victory for Taxpayers — And the Rule of Law

Once again, President Obama’s vaunted pen and phone have run into trouble with the law. This time, the nonpartisan Government Accountability Office (GAO), acting in its function as comptroller general, concluded that the administration has implemented Obamacare’s reinsurance program in an illegal and impermissible manner. Rather than focusing first on repaying the Treasury, as the text of the statute requires, the administration has placed its first and highest priority on bailing out insurers.

In an opinion requested by numerous members of Congress and released this afternoon, the GAO explained:

We conclude that HHS [Health and Human Services] 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 payment to issuers over payments to the Treasury is not authorized. 

As I have previously explained at NRO, the reinsurance funds collected from employers had two – distinct purposes: first, to repay Treasury for the $5 billion cost of a separate program in place from 2010 through 2013; and, second to subsidize insurers selling Obamacare plans to high-cost patients during the law’s first three years.

When collections from employers turned out to be less than expected, HHS prioritized the second objective to the exclusion of the first – an action that, according to the GAO, violates the plain text of the statute. As the opinion noted, “the fact that HHS’s collections ultimately fell short of the projected amounts does not alter the meaning of the statute.” The memo continued that, because agencies must “‘effectuate the statutory scheme as much as possible’ . . . HHS continues to have an obligation to carry out the statutory scheme using a method reflective of the specified amounts even though actual collections were lower than projected.” As a result, the GAO concluded that the Department has no authority to divert to insurers approximately $3 billion in reinsurance contributions that should be allocated to the Treasury.

The GAO legal team found HHS’s justification for its actions to date unpersuasive:

HHS’s position regarding prioritization of collections for reinsurance payments appears to be driven solely by the factual circumstances presented 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.” 

The law isn’t a Chinese menu, where federal bureaucrats can pick and choose which portions they wish to follow. They must follow all of the law, as closely as possible — even the portions they disagree with.

In reaching its conclusion, the GAO agreed with the nonpartisan Congressional Research Service and with other outside experts, each of whom said that HHS had violated the law in a way that was not subject to regulatory deference. And while the GAO’s reinsurance opinion is the most recent legal smackdown of the Obama administration’s craven efforts to bail out insurers, it is by no means the first: In May, Judge Rosemary Collyer ruled that the administration violated the constitution by spending funds on cost-sharing subsidies that Congress never appropriated.

More and more insurers are announcing their departure from Obamacare’s exchanges — Blue Cross Blue Shield announced this month that it is pulling out of the Obamacare marketplace in Nebraska and in most of Tennessee. Given these implosions, the return of $3 billion in taxpayer funds to the Treasury represents a blow to HHS’s bailout strategy. It demonstrates the law’s fundamentally flawed design, whereby the administration can keep insurers offering coverage on exchanges only by flouting the law to give them billions of dollars in taxpayer funds they do not deserve.

Conservatives should applaud the members of Congress who requested this ruling, which helps to staunch the flow of crony-capitalist dollars to insurers. Much more work remains, however. Congress should also act to protect its power of the purse with respect to Obamacare’s risk corridors — ensuring that the administration does not fund through a backroom legal settlement the payments to insurers that Congress explicitly prohibited two years ago. When they return in November, members should step up their oversight of both the risk-corridor and reinsurance programs: They should find out why HHS acted in such an illegal manner in the first place and whether insurance-company lobbyists encouraged the administration to violate the statute’s plain text.

For now, however, conservatives should rightly celebrate the legal victory that GAO’s opinion represents. Obamacare represented a massive increase in government spending and a similarly large increase in government authority. Today’s opinion has clipped both — a victory for taxpayers and the rule of law.

This post was originally published at National Review.