[Updat­ed Octo­ber 1, 2013]

The new health care exchanges opened for busi­ness today, even as most fed­er­al gov­ern­ment oper­a­tions shut down.

That result is exact­ly the oppo­site of what House Repub­li­cans intend­ed when they set­tled on their strat­e­gy of link­ing gov­ern­ment fund­ing with Oba­macare “defund­ing.” They insist­ed that their tac­tics would keep the gov­ern­ment open while stop­ping the health law in its tracks, though nei­ther Sen­ate Democ­rats nor the Pres­i­dent seem inclined to go along.

Con­gress will find some way to mud­dle through. Then what?

In defend­ing their “defund­ing” strat­e­gy, con­ser­v­a­tives argued that they had to stop Oba­macare before today. Once peo­ple began to sign up for sub­si­dized health care cov­er­age, they rea­soned, the health law would stand for­ev­er. For­ev­er, it appears, has now begun.

But the law’s harsh­est crit­ics will not like­ly retire to the side­lines. They will con­tin­ue to resist its imple­men­ta­tion and work for its repeal. They may also tar­get spe­cif­ic pro­vi­sions of the law they despise. One such tar­get is sub­si­dized health insur­ance cov­er­age for Mem­bers of Con­gress and their staffs.

Con­gres­sion­al employ­ees, like oth­er fed­er­al work­ers, cur­rent­ly par­tic­i­pate in the Fed­er­al Employ­ees Health Ben­e­fit plan (FEHB). The health care law requires Con­gres­sion­al employ­ees, begin­ning Jan­u­ary 1, to instead obtain their cov­er­age through health insur­ance exchanges (1312(d)(3)(D)). The plain read­ing of this pro­vi­sion and accom­pa­ny­ing law requires them to pay full price for their health care and to relin­quish their gov­ern­ment sub­si­dies that pick up, on aver­age, 72 per­cent of the cost of their insurance.

But the Office of Per­son­nel Man­age­ment (OPM) issued a rule in ear­ly August that allows Con­gres­sion­al work­ers to keep their gov­ern­ment sub­si­dies while in the exchanges.

The rule has proven unpop­u­lar with the pub­lic, with one poll find­ing that 92 per­cent object to their elect­ed rep­re­sen­ta­tives being giv­en spe­cial treat­ment in the exchanges. The provision’s unpop­u­lar­i­ty prompt­ed David Vit­ter (R‑LA) to pro­pose an amend­ment to over­turn the OPM rule and require the Pres­i­dent, Vice Pres­i­dent and polit­i­cal appointees also to pur­chase unsub­si­dized cov­er­age through the exchanges.  Vitter’s amend­ment was so polit­i­cal­ly tox­ic that Sen­ate Major­i­ty Leader Har­ry Reid (D‑NV) with­drew the under­ly­ing bill from Sen­ate con­sid­er­a­tion to spare his col­leagues from hav­ing to vote on Vit­ter’s language.

But in the hours before the gov­ern­ment shut­down, both the House and Sen­ate vot­ed on a Vit­ter-like pro­vi­sion.  Con­gres­sion­al Democ­rats vot­ed over­whelm­ing­ly against it, argu­ing that a res­o­lu­tion to keep the gov­ern­ment func­tion­ing should not include what they regard as extra­ne­ous provisions.

They may come to regret that vote, par­tic­u­lar­ly as details emerge about secret nego­ti­a­tions involv­ing Reid, Speak­er Boehn­er and the White House that occurred over the course of months.  Politi­co has unearthed email traf­fic indi­cat­ing that OPM ini­tial­ly decid­ed that Con­gres­sion­al employ­ees did­n’t qual­i­fy for sub­si­dies.  That stirred rare bipar­ti­san and bicam­er­al efforts to lob­by the White House to reverse the agen­cy’s deci­sion.  At one point, Reid and the Speak­er were to meet pri­vate­ly with the Pres­i­dent on the mat­ter.  All par­ties agreed to tell the press that the meet­ing con­cerned immi­gra­tion in order to con­ceal its true pur­pose.  While it nev­er occurred, dis­cus­sions with the White House Chief of Staff even­tu­al­ly result­ed in OPM revers­ing its decision.

An amend­ment to undo the deal is like­ly to re-emerge in some form in the days ahead. Its crit­ics have offered good argu­ments and bad for oppos­ing it. The bet­ter argu­ments say that this spe­cial deal is a good thing, since Mem­bers and their aides shouldn’t lose their gov­ern­ment sub­si­dies based on what the provision’s spon­sor acknowl­edges to be a poor­ly draft­ed pro­vi­sion of law. The poor­er argu­ments sug­gest that Con­gress is not get­ting a spe­cial deal at all, argu­ments that look increas­ing­ly ridicu­lous in view of the rev­e­la­tions in Politico.

That argu­ment nev­er­the­less per­sists.  It was recent­ly advanced by Prince­ton Uni­ver­si­ty Pro­fes­sor Uwe Rein­hardt on a New York Times blog.  Rein­hardt lays out for his read­ers the text of the pro­vi­sion bar­ring Con­gres­sion­al employ­ees from par­tic­i­pat­ing in the FEHB:

(D) MEMBERS OF CONGRESS IN THE EXCHANGE.

(i) REQUIREMENT. Notwith­stand­ing any oth­er pro­vi­sion of law, after the effec­tive date of this sub­ti­tle, the only health plans that the Fed­er­al Gov­ern­ment may make avail­able to mem­bers of Con­gress and con­gres­sion­al staff with respect to their ser­vice as a mem­ber of Con­gress or con­gres­sion­al staff shall be health plans that are:

(I) cre­at­ed under this act (or an amend­ment made by this act); or (II) offered through an exchange estab­lished under this act (or an amend­ment made by this act).

(ii) DEFINITIONS. In this section:

(I) MEMBERS OF CONGRESS. The term “mem­ber of Con­gress” means any mem­ber of the House of Rep­re­sen­ta­tives or the Senate.

(II) CONGRESSIONAL STAFF. The term “con­gres­sion­al staff” means all full-time and part-time employ­ees employed by the offi­cial office of a mem­ber of Con­gress, whether in Wash­ing­ton, D.C., or out­side Wash­ing­ton, D.C.

Rein­hardt argues that the sec­tion itself is silent on whether Con­gres­sion­al employ­ees can receive subsidies:

“Does it state in the sec­tion that the fed­er­al gov­ern­ment may not con­tin­ue to make the tra­di­tion­al employ­er-pro­vid­ed con­tri­bu­tions to the tar­get­ed employ­ees’ health insur­ance? As I read this short sec­tion, it says absolute­ly noth­ing about this issue.”

Actu­al­ly, it says a good deal about the issue: “notwith­stand­ing any oth­er pro­vi­sion of law” – in par­tic­u­lar, the law that makes them eli­gi­ble for FEHB cov­er­age and sub­si­dies – Con­gres­sion­al employ­ees must look else­where for their health cov­er­age. The bur­den is on Pro­fes­sor Rein­hardt to show that Con­gres­sion­al employ­ees can both be ban­ished from the FEHB and enti­tled to its sub­si­dies. He makes no effort to do that beyond cit­ing a Con­gres­sion­al Research Ser­vice paper that is, on close exam­i­na­tion, at best ambigu­ous on the subject.

The ques­tion that Pro­fes­sor Rein­hardt side­steps is the crit­i­cal one: “By what legal author­i­ty can the fed­er­al gov­ern­ment sub­si­dize indi­vid­ual cov­er­age that its employ­ees obtain through exchanges?”

Oth­ers have more direct­ly addressed this ques­tion, though not with con­vinc­ing results. Nicholas Bagley, a Uni­ver­si­ty of Michi­gan Law Pro­fes­sor, has writ­ten on the Inci­den­tal Econ­o­mist blog that the FEHB statute itself allows Con­gres­sion­al employ­ees who enroll in cov­er­age through health insur­ance exchanges to keep their FEHB sub­si­dies.  He cites 5 USC 8901(6), which defines “health ben­e­fits plan” for pur­pos­es of the FEHB, argu­ing that indi­vid­ual health plans pur­chased through the exchanges meet this def­i­n­i­tion and that Con­gres­sion­al employ­ees who enroll in such plans can there­fore receive gov­ern­ment subsidies.

OPM, in its rule, made a sim­i­lar assertion.

“Although, pur­suant to its author­i­ty under chap­ter 89 of title 5, OPM will have no role in ‘con­tract­ing for’ or ‘approv­ing’ health ben­e­fit plans that are offered through the Exchanges, there is no doubt that such plans fit with­in the def­i­n­i­tion of ‘health ben­e­fit plan’ under 8901(6). ”

Note that the agency acknowl­edges some of the anom­alies in its approach, since the law makes no pro­vi­sion for sub­si­diz­ing cov­er­age pro­vid­ed by plans that OPM has nei­ther con­tract­ed with nor approved.  The legal basis for its deci­sion rests entire­ly on its asser­tion that indi­vid­ual plans sold through exchanges meet the statu­to­ry def­i­n­i­tion of “health ben­e­fit plan.”  A care­ful read­ing of that pro­vi­sion leaves no doubt that such plans do not meet that def­i­n­i­tion.  Here is the pro­vi­sion (5 USC 8901(6)):

 “(6) ‘health ben­e­fits plan’ means a group insur­ance pol­i­cy or con­tract, med­ical or hos­pi­tal ser­vice agree­ment, mem­ber­ship or sub­scrip­tion con­tract, or sim­i­lar group arrange­ment pro­vid­ed by a car­ri­er for the pur­pose of pro­vid­ing, pay­ing for, or reim­burs­ing expens­es for health services.”

Note that the def­i­n­i­tion refers to a “group insur­ance pol­i­cy or con­tract” or “sim­i­lar group arrange­ment.” Plans sold through the exchanges are indi­vid­ual poli­cies. They are not group plans. As such they do not — and can­not, absent a change in the law — meet the def­i­n­i­tion of “health ben­e­fits plan” and there­fore can­not be eli­gi­ble for subsidies.

Pro­vid­ing sub­si­dies for indi­vid­ual plans pur­chased through the exchanges would run afoul of oth­er legal require­ments of the FEHB pro­gram. To qual­i­fy as a “health ben­e­fits plan,” a health insur­ance pol­i­cy must be issued by a “car­ri­er.”  A “car­ri­er,” is defined as an enti­ty that issues “group insur­ance poli­cies or con­tracts” (5 USC 8901(7)), a def­i­n­i­tion that insur­ers sell­ing through exchanges do not meet.  Sec­tion 8903 lists the vari­eties of “health ben­e­fits plans” for which OPM may con­tract; plans sold through the exchanges do not fall into any of these categories.

5 USC 8906 seals the argu­ment when it pro­vides that the gov­ern­ment can con­tribute to pre­mi­ums only for “health ben­e­fits for an employ­ee or annu­i­tant enrolled in a health ben­e­fits plan under this chap­ter.” Because of Oba­macare, Con­gres­sion­al employ­ees are inel­i­gi­ble to enroll in health ben­e­fits plans “under this chap­ter” – that is, under the FEHB. They there­fore can­not ben­e­fit from gov­ern­ment subsidies.

5 USC 8909 cre­ates a spe­cial fund in the Trea­sury to col­lect and dis­burse pre­mi­ums and gov­ern­ment con­tri­bu­tions to health plans.  Dis­burse­ments from this fund can only be used to cov­er the agen­cy’s admin­is­tra­tive costs and to “make pay­ments to approved health ben­e­fits plans” (5 USC 8909(a)(1)).  OPM acknowl­edged in its rule that it has not “approved” health insur­ance plans sold through the exchanges.  It is there­fore ille­gal for OPM to make pay­ments to health plans offered through the exchanges.

In short, OPM’s deci­sion to pro­vide a polit­i­cal­ly favored class with sub­si­dies for non-group health insur­ance cov­er­age is entire­ly con­trary to law.

That OPM bent and twist­ed the rules to pro­vide Con­gres­sion­al employ­ees with these sub­si­dies is abun­dant­ly clear in oth­er ways. The agency acknowl­edged in its Q&A doc­u­ment explain­ing the rule that Oba­macare “pro­hibits an employ­er from pro­vid­ing a qual­i­fied health plan through an Exchange,” the very arrange­ment that OPM is sanc­tion­ing for Con­gres­sion­al employ­ees.  OPM sim­ply declares that this restric­tion does not apply to the fed­er­al gov­ern­ment with respect to its Con­gres­sion­al employ­ees, again with­out offer­ing any legal justification.

More­over, the only sub­si­dies avail­able through the indi­vid­ual exchanges are income-relat­ed.  This rule gives Con­gres­sion­al employ­ees anoth­er spe­cial excep­tion.  Mem­bers of Con­gress earn rough­ly four times the income lim­it for exchange sub­si­dies, yet will receive sub­si­dies that will be greater, on aver­age, than those who earn as lit­tle as $34,000 annually.

OPM also has to con­tort the sub­si­dies them­selves to make them work in the exchanges. The FEHB uses pure com­mu­ni­ty rat­ing – two employ­ees who sign up for the same plan pay the same pre­mi­um regard­less of their age. Exchange-rat­ed plans, how­ev­er, will charge the old­est enrollees pre­mi­ums that are three times as large as those paid by the youngest enrollees. Will Con­gres­sion­al employ­ees be forced to com­ply with the 3:1 ratio or will insur­ers have to charge them a pure­ly com­mu­ni­ty-rat­ed pre­mi­um? If they com­ply with the 3:1 ratio, how will sub­si­dies be com­put­ed? Will old­er work­ers be forced to pay more for their cov­er­age or will the gov­ern­ment give them larg­er sub­si­dies than younger employees?

Prac­ti­cal prob­lems engen­dered by this agency dis­tor­tion abound. OPM deter­mines pre­mi­um sub­si­dies by com­put­ing the “weight­ed aver­age of the pre­mi­ums that will be in effect dur­ing the fol­low­ing con­tract year with respect to: (A) enroll­ments under this chap­ter for self alone; and (B) enroll­ments under this chap­ter for self and fam­i­ly” (5 USC 8906).  Since OPM has no con­tracts with insur­ers who sell through the exchanges, those pre­mi­ums do not fig­ure into the “weight­ed aver­age” cal­cu­la­tion, ren­der­ing the process for deter­min­ing sub­si­dies arbi­trary and uncertain.

And speak­ing of con­tracts, 5 USC 8909 pro­vides author­i­ty for OPM to pay sub­si­dies on behalf of its employ­ees to the plans with which it has con­tract­ed. Legal prob­lems aside, how, exact­ly, will it make month­ly pay­ments to mul­ti­ple insur­ers scat­tered through­out the coun­try whose con­tracts are with exchanges and not with OPM?  Con­gres­sion­al employ­ees do not all work and live in Wash­ing­ton.  Mem­bers main­tain offices and employ staff in every state and Con­gres­sion­al dis­trict.  They will be enrolling in plans offered through vir­tu­al­ly every exchange in the coun­try, cre­at­ing a logis­ti­cal night­mare for an agency that will have to dis­burse pre­mi­ums and sub­si­dies on a month­ly or bi-week­ly basis to numer­ous plans with which it has no con­trac­tu­al rela­tion­ship.  It’s worth not­ing that Sen­ate employ­ees have been asked to delay sign­ing up for plans sold through the exchanges, per­haps to give OPM and those who admin­is­ter employ­ee ben­e­fits for Con­gres­sion­al employ­ees addi­tion­al time to fig­ure all this out.

This is, in short, a spe­cial deal for Con­gres­sion­al employ­ees that required a fed­er­al agency to twist the law, bend its reg­u­la­tions, and dis­tort the very nature of the FEHB pro­gram in order to pro­vide gov­ern­ment sub­si­dies to some very pow­er­ful and influ­en­tial people.

This offends many people’s sense of fair­ness. They expect Mem­bers to abide by the laws they enact. But is it fair to take gov­ern­ment sub­si­dies away from hard-work­ing Con­gres­sion­al employ­ees sim­ply because of what the provision’s spon­sor, Sen­a­tor Charles Grass­ley (R‑IA), describes as a “draft­ing error” made by Demo­c­ra­t­ic aides?  His leg­is­la­tion, accord­ing to Grass­ley, was nev­er meant to take his sub­sidy away.  Bob Mof­fit of the Her­itage Foun­da­tion has doc­u­ment­ed that the orig­i­nal Grass­ley amend­ment con­tained a pro­vi­sion that explic­it­ly pro­vid­ed the sub­si­dies, as did the House-passed bill.  That pro­vi­sion was removed from the final Sen­ate ver­sion, which even­tu­al­ly became law.  The exci­sion of the sub­si­dies was evi­dent­ly inad­ver­tent, an error that Grass­ley attrib­ut­es to aides to Sen­a­tor Reid.  Why should Con­gres­sion­al staffers, who work long hours as pub­lic ser­vants, for­feit an impor­tant and val­ued ben­e­fit because of slop­py work­man­ship by one of their colleagues?

While I object to the ham-hand­ed and extra-legal means that the Admin­is­tra­tion is using to con­tin­ue sub­si­diz­ing Con­gres­sion­al health cov­er­age, I agree with the result.  I don’t want staffers to have to pay full price for cov­er­age that may well prove infe­ri­or to what they now have.  Most peo­ple who live out­side the Belt­way, though, will not find them or their boss­es to be an espe­cial­ly sym­pa­thet­ic group. Mil­lions of peo­ple may suf­fer mis­for­tunes as a result of the new health care law, includ­ing the loss of employ­er-sub­si­dized cov­er­age. If Con­gress isn’t will­ing to spare ordi­nary Amer­i­cans the con­se­quences of its pol­i­cy errors, why should OPM spare Con­gress the con­se­quences of its draft­ing errors?

Con­gress should clear all this up by putting the propo­si­tion to a vote – this time with­out the com­pli­ca­tions of a loom­ing gov­ern­ment shut­down.  Such a vote car­ries polit­i­cal risk.  But it is a risk that is unavoidable.