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.