A federal judge recently ruled that the Obama administration violated the Constitution by spending $7 billion on subsidies for insurance companies without Congress’s permission. Worse still, the administration knew all along that it was flouting the law.
If the ruling is upheld, Americans will face higher premiums and fewer choices in the health insurance market. If it comes to that, they’ll have President Obama to thank.
At issue are the Affordable Care Act’s “cost-sharing reduction” subsidies. Obamacare’s “essential benefits” mandates require all exchange policies to cover a long list of services, from maternity care to substance abuse treatment to speech pathology counseling. In a normal market, insurers would charge patients higher premiums, deductibles, and copayments to cover the costs of these extensive benefits.
That’s a stretch for lower-income folks. So Obamacare created cost-sharing reduction subsidies to help people with incomes up to 250 percent of the federal poverty line — or $60,750 for a family of four — shoulder deductibles, co-pays, coinsurance, and other out-of-pocket expenses.
The subsidies were not to go to individuals but insurers. Beneficiaries would just see their impact when they paid their bills. That was the plan, at least. But Congress refused to appropriate the funds required to fund the cost-sharing reduction program.
That didn’t stop the administration from dispersing the cost-sharing subsidies anyway. Some 5.6 million people — 56 percent of exchange enrollees — are receiving cost-sharing reduction subsidies, without congressional authorization.
Recently, Rosemary M. Collyer, a federal judge for the U.S. District Court for the District of Columbia, pointed out the obvious — these payments are blatantly unconstitutional. “It is a most curious and convoluted argument whose mother was undoubtedly necessity,” she wrote of the Obama administration’s defense of its actions.
There isn’t a lot of room for interpretation. Article I of the Constitution gives Congress “the power of the purse,” or the authority to appropriate public funds — to decide how they must be spent by the executive. The framers feared that without this check, presidents would be free to do whatever they wanted with taxpayer money.
The Obama administration seems to have hoped that no one would notice. A recent congressional investigation revealed that officials at the Internal Revenue Service and the Office of Management and Budget held a secret meeting to discuss how best to justify these payments. Those in attendance were prohibited from taking notes or copying the memos outlining the administration’s position.
Several officials voiced concerns. Former IRS staffer David Fisher recalled pointing out that “there is no linkage to the permanent appropriation, nor is there any link to any other appropriation that was indicating what account these funds should be paid from.”
In other words, the administration knew the subsidy payments were unconstitutional. And they went to great lengths to hide it. They did so because adhering to Article I would have forced millions of Americans to pay much more for health care.
Obamacare prohibits insurers from raising out-of-pocket costs for many enrollees in the ACA exchanges. Without the federal subsidies, insurers will have to swallow an estimated $9 billion in costs in 2017 — and $170 billion over the next decade.
They’ll compensate by raising premiums — for everyone.
Alternatively, insurers could simply leave the exchanges. Several have already determined that operating in these marketplaces is prohibitively expensive. UnitedHealth Group, the largest insurer in the country, has withdrawn from 31 state exchanges and remains active in only three. Humana has decided to pull out of Virginia’s and Alabama’s exchanges in 2017.
Less competition in the exchanges will yield higher prices — and fewer choices for consumers.