AARP’s Own Age Tax

Over the past few weeks, AARP—an organization that purportedly advocates on behalf of seniors—has been running advertisements claiming that the House health-care bill would impose an “age tax” on seniors by allowing for greater variation in premiums. It knows of which it speaks: AARP has literally made billions of dollars by imposing its own “tax” on seniors buying health insurance policies, not to mention denying care to individuals with disabilities.

While the public may think of AARP as a membership organization that advocates for liberal causes or gives seniors discounts at restaurants and hotels, most of its money comes from selling the AARP name. In 2015, the organization received nearly three times as much revenue from “royalty fees” than it did from member dues. Most of those royalty fees come from selling insurance products issued by UnitedHealthGroup.

Only We Can Profit On the Elderly

So in the sale of Medigap plans, AARP imposes—you guessed it!—a 4.95 percent age tax on seniors. AARP not only makes more money the more people enroll in its Medigap plans, it makes more money if individuals buy more expensive insurance.

Even worse, AARP refused good governance practices that would disclose the existence of that tax to seniors at the time they apply for Medigap insurance. While working for Sen. Jim DeMint in 2012, I helped write a letter to AARP that referenced the National Association of Insurance Commissioners’ Producer Model Licensing Act.

Specifically, Section 18 of that act recommends that states require explicit disclosure to consumers of percentage-based compensation arrangements at the time of sale, due to the potential for abuse. DeMint’s letter asked AARP to “outline the steps [it] has taken to ensure that your Medigap percentage-based compensation model is in full compliance with the letter and spirit of” those requirements. AARP never gave a substantive reply to this congressional oversight request.

Don’t Screw With Obamacare, It’s Making Us Billions

Essentially, AARP makes money off other people’s money—perhaps receiving insurance premium payments on the 1st of the month, transferring them to UnitedHealth or its other insurance affiliates on the 15th of the month, and pocketing the interest accrued over the intervening two weeks. That’s nearly $3.2 billion in profit over six years, just from selling insurance plans. AARP received much of that $3.2 billion in part because Medigap coverage received multiple exemptions in Obamacare. The law exempted Medigap plans from the health insurer tax, and medical loss ratio requirements.

Most importantly, Medigap plans are exempt from the law’s myriad insurance regulations, including Obamacare’s pre-existing condition exclusions—which means AARP can continue its prior practice of imposing waiting periods on Medigap applicants. You read that right: Not only did Obamacare not end the denial of care for pre-existing conditions, the law allowed AARP to continue to deny care for individuals with disabilities, as insurers can and do reject Medigap applications when individuals qualify for Medicare early due to a disability.

The Obama administration helped AARP in other important ways. Regulators at the Department of Health and Human Services (HHS) exempted Medigap policies from insurance rate review of “excessive” premium increases, an exemption that particularly benefited AARP. Because the organization imposes its 4.95 percent “age tax” on individuals applying for coverage, AARP has a clear financial incentive to raise premiums, sell seniors more insurance than they require, and sell seniors policies that they don’t need. Yet rather than addressing these inherent conflicts, HHS decided to look the other way and allow AARP to continue its shady practices.

The Cronyism Stinks to High Heaven

AARP will claim in its defense that it’s not an insurance company, which is true. Insurance companies must risk capital to pay claims, and face losses if claims exceed premiums charged. By contrast, AARP need never risk one dime. It can just sit back, license its brand, and watch the profits roll in. Its $561.9 million received from UnitedHealthGroup in 2015 exceeded the profits of many large insurers that year, including multi-billion dollar carriers like Centene, Health Net, and Molina Healthcare.

But if the AARP now suddenly cares about “taxing” the aged so much, Washington should grant them their wish. The Trump administration and Congress should investigate and crack down on AARP’s insurance shenanigans. Congress should subpoena Sebelius and Sylvia Mathews Burwell, her successor, and ask why each turned a blind eye to its sordid business practices. HHS should write to state insurance commissioners, and ask them to enforce existing best practices that require greater disclosure from entities (like AARP) operating on a percentage-based commission.

And both Congress and the administration should ask why, if AARP cares about its members as much as it claims, the organization somehow “forgot” to lobby for Medigap reforms—not just prior to Obamacare’s passage, but now. AARP’s fourth quarter lobbying report showed that the organization contacted Congress on 77 separate bills, including issues as minor as the cost of lifetime National Parks passes, yet failed to discuss Medigap reform at all.

This post was originally published at The Federalist.

The Limousine Liberals Who Won’t Join Obamacare

Even by government standards, it’s an outlandish story of wealth and hypocrisy: A bureaucrat who made more than one million dollars selling Obamacare insurance plans, but won’t buy one for himself? The sad thing is, it also happens to be true.

Meet Peter Lee, Executive Director of Covered California. In the past three years alone, Mr. Lee has made well over one million dollars running California’s Obamacare Exchange. He received massive raises the past two years, going from a salary of $262,644 in 2014 to $420,000 beginning this July. On top of that nearly $160,000 raise, Peter Lee received two other whopping bonuses of $52,258 in 2014 and $65,000 in 2015—winning more in one lump sum than many families make in an entire year. But at a September briefing, I asked Mr. Lee point blank what type of health coverage he holds, and he said he was enrolled in California’s state employee plan.

Think about that: a bureaucrat whose salary comes from selling Exchange plans—Covered California’s operating budget derives from surcharges on plans sold through the Exchange—but yet won’t buy one of the plans he sells for himself. It’s enough to make a person ask how much Mr. Lee would have to make before he would actually break down and buy one of the plans he sells—a million dollars? Two million? Five million?

Liberal One-Percenters: Good for You, Not for Me

I’ll concede right now that Obamacare’s Exchanges were designed primarily for those without employer coverage. Individuals whose employers do offer “affordable” coverage cannot receive subsidies on Exchanges, although they can enroll without a subsidy, if they so choose. Most Americans choose employer coverage, because firms heavily subsidize them—to the tune of an average of $12,865 for family coverage. For the average worker making $60,000, or even $80,000, per year, turning down the employer subsidy to purchase an unsubsidized Exchange plan represents a substantial pay cut, one many families could not afford.

But well-paid liberals like Peter Lee—who over the last two years received raises more than twelve times the average employer’s subsidy for health coverage—have no real financial excuse not to join the Exchanges—other than liberal elitism. As the owner of a new small business who likely won’t make six figures this year, I have little patience to hear supposed believers in Obamacare with far more means than I who won’t give up a few thousand dollars in employer subsidies to enroll on the Exchanges themselves. After all, aren’t liberals the ones who believe in social solidarity and “paying your fair share” anyway…?

Well-Heeled Bureaucrats and Think Tankers’ Hypocrisy

For instance, Centers for Medicare and Medicaid Services (CMS) Acting Administrator Andy Slavitt literally cashed in to the tune of over $4.8 million in stock options on joining the Administration—more than enough to forego any employer subsidy for his health coverage. He recently responded to a questioner on Twitter asking him why he wasn’t on Medicare by stating that he was only 49 years of age—too young to qualify. Within minutes, I sent Slavitt a follow-up tweet: “If Obamacare is so great, are you on the Exchange—and if not, why not?” Slavitt has yet to reply.

Both Slavitt, and Health and Human Services Secretary Sylvia Burwell (net worth: $4.6 million), have plenty of financial resources to forego an employer subsidy and purchase Exchange coverage. Even at a total premium of $15,000 for his family, one year’s insurance costs would total less than 0.3% of the stock gains Slavitt cashed in on when joining the Administration—to say nothing of the millions he likely will make when he “cashes in” on his government experience in just a few months.

Did Slavitt just not see my tweet asking him about his health coverage? Did he not reply because the person in charge of selling Exchange policies doesn’t think they’re good enough to buy one himself? Or does he believe that someone who made millions a few short years ago is too “poor” to give up a few thousand dollars in employer subsidies for his health care?

The ranks of well-paid liberals clamming up when asked about their health benefits extends beyond government, into the think-tank ranks as well. In September, the Urban Institute published a paper claiming that Exchange coverage was actually cheaper than the average employer plan. I e-mailed the papers’ authors, asking them a simple question: Had they taken steps to enroll in Exchange coverage themselves—and encouraged the Urban Institute to send all its employees to the Exchanges?

I have yet to receive a reply from the three researchers. But after doing some digging, I found the Urban Institute’s Form 990 filing with the IRS. The form reveals that one of the study’s authors, John Holahan, received a total of $313,932 in compensation in 2014—$267,051 in salary, and $46,881 in other compensation and benefits. Does Mr. Holahan therefore believe that giving up his subsidized benefits, and relying “only” upon his $267,051 salary, presents too great a sacrifice for him to bear financially? If he and his colleagues truly believe Exchange plans are more efficient than employer coverage—as opposed to just coming up with a talking point to rebut Obamacare’s massive premium increases—then shouldn’t they enroll themselves?

I Make $400,000—So Quit Whining about Your Cost Hike

Then there’s Larry Levitt, a Senior Vice President at the Kaiser Family Foundation. Last week Levitt tweeted that Exchange premium increases don’t apply to many people—a talking point that Drew Altman, Kaiser’s CEO, has also made in blog posts. I replied asking whether Levitt himself, or other people using this talking point, actually have Exchange coverage—to which Levitt gave no response.

Care to guess how much these scholars claiming Exchange premium increases are overrated make themselves? According to Kaiser’s IRS filing, Levitt received $333,048 in salary, and $48,563 in benefits, in 2014. His boss, Drew Altman, pulled down a whopping $642,927 in salary, $149,509 in retirement plan contributions, and a $13,545 expense account—nearly $806,000 in total compensation.

The contradictions from the Kaiser researchers are ironic on two levels. One could certainly argue that an executive making nearly $400,000, let alone over $800,000, doesn’t need comprehensive health insurance—except to protect from severe emergencies, like getting hit by the proverbial bus. However, both appear loathe to give up their employer-provided health coverage—and equally quick to minimize the impact of Obamacare’s premium increases nationwide. As I noted on Twitter, that’s easy for people who refuse to join the Exchanges to say.

Stupid Is What Stupid Does?

Last, but certainly not least, on the hit parade is MIT professor Jonathan “Stupidity of the American Voter” Gruber. Last week Gruber said both that the law “was working as designed” and that people who lost their coverage thanks to the law “never had real insurance to begin with.” Unfortunately, MIT’s tax filings don’t include his salary. However, given that Gruber’s infamous undisclosed contract with the Obama Administration totaled nearly $400,000, and that he literally made millions from other contracts, it’s fair to say Gruber could afford to purchase his own health insurance outside his employer—if he wanted to. So I e-mailed him, and asked him whether he gave up his employer coverage to purchase that “real insurance” that Obamacare provides. Wouldn’t you know, I have yet to receive a reply.

It’s bad enough that the individuals above apparently refuse to give up their platinum-plated health plans to join the Exchanges—even though it would cost them at most a few percentage points of their total compensation to do so. They also wish to cast stones from their ivory towers at those of us who are facing higher premiums, rising deductibles, fewer (if any) choices of insurers, and smaller doctor networks thanks to the law they claim to support.

So to all those well-heeled Obamacare supporters who can afford to enroll in Obamacare themselves, but simply won’t, I’ll make one final point: Disagree with me if you like, but I’m working my damnedest to stop Obamacare’s bailouts—even though I know that if I “win” on the policy, I could lose my health coverage. It’s called standing on principle. It’s a novel concept—you might want to try it sometime.

This post was originally published at The Federalist.

Obamacare Enrollment and Low Expectations

The infamous bungled launch of HealthCare.gov came exactly a year ago. While this year’s open enrollment doesn’t start until Nov. 15, administration officials, mindful of last year’s “debacle,” are already working to lower expectations.

Health and Human Services Secretary Sylvia Mathews Burwell declined, when speaking with reporters last week, to endorse the Congressional Budget Office’s enrollment target of 13 million participants in insurance exchanges next year. She also declined to say when a new target might be announced.

It’s perhaps not surprising that the administration is seeking to tamp down expectations. This year’s open-enrollment period starts later than last year’s did; it runs for only three months, compared with six in 2013; and it falls in the middle of the Thanksgiving and Christmas holidays. When it comes to enrollment and outreach, most of the “low-hanging fruit“–individuals with a strong desire to purchase health insurance–have already signed up.

The fact that this year’s open-enrollment period is also the first Obamacare re-enrollment period will also drive traffic to the online exchanges–and could create confusion. Even advocates of the law have talked about the “massive technological challenges” associated with such an effort. And individuals who do not actively re-enroll through HealthCare.gov and choose instead to remain in their 2014 plans through 2015 could face significant premium increases.

President Barack Obama came into office hoping to restore Americans’ faith in government. Yet last fall the federal government’s ability to provide basic functionality to a Web site was viewed as nothing short of miraculous, and this fall the administration has declined to say whether 2015 insurance enrollment will meet expectations. The administration appears to be hoping that Obamacare will benefit from low expectations–and that in itself says a lot about the status of President Obama’s legacy.

This post was originally published at the Wall Street Journal Think Tank blog.

How the Sequester Could Cost Obamacare Insurers

In a Think Tank post Thursday, I wrote about how insurers deciding to participate next year in the health exchanges established under Obamacare could be expecting funds that the federal government may not have legal authority to disburse. But that’s not the only potential pitfall for carriers: They could also end up on the hook for payment reductions caused by sequestration.

In the spring of 2013, the Obama administration submitted a report to Congress indicating that, while subsidies for health insurance premiums on the exchanges were not subject to the budget sequester, the separate program of cost-sharing subsidies—reducing deductibles and co-payments for certain low-income individuals—faced a 7.2% cut in fiscal 2014. Marilyn Tavenner, the administrator of the Centers for Medicare and Medicaid Services, confirmed this position during congressional testimony last August.

In a March report to Congress, however, the administration said that both the premium and cost-sharing subsidies were exempt from the sequester. Last month, in response to questions, Sylvia Mathews Burwell—then the head of the Office of Management and Budget, now the secretary of health and human services—told several senators that the cost-sharing and premium subsidies “will be paid out of the same account” as a way to “improve the efficiency in the administration of the subsidy payments” and that payments from that account are exempt from the budget sequester.

The problem with this? That’s not what the law says. As I pointed out last October, the premium and cost-sharing subsidies were established in two separate sections of Obamacare. The premium subsidies are codified in the Internal Revenue Code, which is administered by the Treasury Department and payable to individuals. The cost-sharing subsidies are codified in the Public Health Service Act, which is administered by the Department of Health and Human Services and payable to insurers. And while the premium subsidies are structured in a way that should exempt them from the budget sequester, the cost-sharing subsidies are not.

The administration appears to be using efficiency arguments to try to shield the cost-sharing subsidies from the sequester. But the sequester is a zero-sum proposition, so exempting the cost-sharing subsidies from sequestration means other programs would take a greater budgetary hit—and affected organizations or programs may have standing to challenge in court.

The bottom line: The nonpartisan Congressional Research Service warned in May 2013 that insurers could be on the hook to absorb the billions of dollars in sequester cuts to the cost-sharing subsidies. As with the “risk corridor” provision of Obamacare, insurers participating under the assumption that these legal questions will be easily resolved may be doing so at their own risk.

This post was originally published at the Wall Street Journal Think Tank blog.