Did the White House Overstep Appropriations Law to Pay Insurers?

House Republicans on Thursday released an investigative report and held the first of two hearings questioning the legality of Obamacare’s cost-sharing reduction program. That program is also the subject of a House lawsuit against the administration.

At issue is whether the cost-sharing program is legally funded. House Republicans, through an investigation conducted by the Ways and Means and Energy and Commerce committees, concluded that the health care law does not provide funding for the cost-sharing program.

Congress, meanwhile, has never appropriated such funding, which means the administration could be without authority in paying for the program. In May, Judge Rosemary Collyer of the U.S. District Court for the District of Columbia sided with the House Republicans on this question, concluding the Department of the Treasury and the Department of Health and Human Services funded the cost-sharing reduction program unconstitutionally because there was no congressional appropriation.

On Thursday, members of the Obama administration argued before the House Ways and Means Committee that the same congressionally approved allocation for funding the law’s tax credits serves as an appropriation for the cost-sharing reduction program.

“The Affordable Care Act directs the executive branch to make these cost-sharing reduction payments, and these payments are of a piece with the same payments that are made to the insurance companies under the premium tax credit, and that’s justification for using the same account,” said Mark Mazur, assistant secretary for tax policy at the Department of the Treasury.

The cost-sharing reduction program was included in the Affordable Care Act as one of two ways to relieve the cost burden for low-income enrollees on the individual market. The other method is premium tax credits for those falling between 100 percent and 400 percent of the federal poverty level.

Individuals eligible for the premium tax credit and that make only up to 250 percent of the federal poverty level are also eligible for cost-sharing assistance as long as they have a silver plan that is obtained on an ACA exchange. The cost-sharing payments on behalf of beneficiaries are made directly to insurers, which then lower what the enrollee pays in deductibles, copays, and out-of-pocket maximums.

It is generally agreed that the ACA authorized both programs and amended an existing permanent funding law to include the premium tax credits. The administration says this particular provision serves as a congressionally approved appropriation for the cost sharing reduction program as well. Before the committee on Thursday, Mazur described the two programs as “integrated.”

However, the GOP and a district court judge believe there is no legal basis for the administration’s claim and that the program has never received a legal appropriation.

The Republicans’ 157-page report offers a nearly four-year narrative of administration discussions surrounding the cost-sharing reduction program and the premium tax credits. Missing from the GOP report, however, is the memo detailing administration’s legal basis for its decision to make payments for the program from the account that pays premium tax credits. Although there allegedly was such a memo written by the Office of Management and Budget describing this legal basis in 2013, it has not been provided to congressional investigators.

“The administration has refused to provide this memorandum to Congress — even pursuant to subpoena,” the GOP’s report reads. “Nevertheless, administration witnesses made it clear during transcribed interviews and a deposition that this memorandum was key to obtaining buy-in from the highest levels of the administration to move forward with paying for the CSR program through the [premium tax credit] account.”

Evidence included in the GOP’s investigation suggests the administration initially did, in fact, believe a separate congressional appropriation for the program was needed. A Department of the Treasury memo in 2012 said that “there is currently no appropriation to Treasury or to anyone else, for purposes of the cost-sharing payments.”

The administration also asked for almost $4 billion for the program in the president’s FY2014 budget in April 2013. The request was withdrawn sometime before mid-July.

During oral arguments in court, reproduced in the congressional report, the administration said it realized a congressional appropriation was not needed and thus withdrew its request.

“There was initially a request and that request was later withdrawn because the administration took a second look and realized that there were principles of appropriations law that made the request unnecessary,” the administration said, per the report.

The memo outlining the administration’s legal justification for paying for the cost-sharing program through the tax credit account then was circulated among top administration officials in different government departments. According to witness testimony, Internal Revenue Service officials who viewed the memo in January 2014 were not all in agreement on the strength of the argument. The witness, who said he was skeptical, said he was in the minority.

In January 2014, Treasury Secretary Jack Lew approved a memorandum authorizing the IRS to begin administering the cost-sharing reduction payments using the same method as the tax credits. The president’s 2015 budget request did not include funding for the cost sharing program.

During Thursday’s hearings, Democrats railed against the GOP for what they said was yet another attempt to undermine Obamacare. Without the law’s provisions designed to make healthcare more affordable, many low-income people would lose access to coverage, they said.

“House Republicans are not conducting meaningful oversight but are instead taking every opportunity to undermine the law and root for its failure. Unfortunately, they are taking actions that will deny much needed health care coverage to their own constituents,” Reps. Frank Pallone (D-N.J.) and Sander Levin (D-Mich.), ranking members of Energy and Commerce and Ways and Means, said in a joint statement.

Republicans pushed back on this idea, noting that the payments go directly to insurers. They also said the issue is not the merits of the program itself but whether or not it follows the rules outlined in the Constitution.

“When it all comes down to it is, ‘Look, people need help.’ Our argument and what we’re trying to drive today is, ‘Yeah, and there’s a way to do it’,” said Rep. Peter Roskam (R-Ill.), chairman of the Ways and Means oversight subcommittee.

“This program is a subsidy for insurance companies. It’s not a subsidy that’s going directly to poor people,” Roskam said. “It’s a subsidy that’s going to insurance companies to offset their costs for the CRS payments. But unlike the premium tax credit program, Congress did not give any money in the ACA for the CSR program.”