U.S. Paid Insurers Funds Meant for Treasury, Auditors Say


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A health insurance fair last November in California, on the first day of open enrollment for the Affordable Care Act.

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Jim Wilson/The New York Times

WASHINGTON — Federal auditors ruled on Thursday that the Obama administration had violated the law by paying health insurance companies more than allowed under the Affordable Care Act in an effort to hold down insurance premiums.

Some of the money was supposed to be deposited in the Treasury, said auditors from the Government Accountability Office.

The administration “ignored the statutory requirement to collect funds for the Treasury,” even though the requirement was expressed in “explicitly mandatory language,” the accountability office said in a legal opinion.

The Obama administration had defended its interpretation of the law, saying the payments to insurers were needed to help moderate increases in premiums under the Affordable Care Act.

Seven Republican members of Congress, all opposed to the health law, had asked for the legal review and welcomed its findings. “The Obama administration can no longer take money from taxpayers to bail out Obamacare,” said Senator John Barrasso, Republican of Wyoming.

The Government Accountability Office is widely regarded as an authority on the legality of federal spending. It does not have enforcement power, but its rulings are usually followed by federal officials, and Congress relies on its work in writing laws and supervising federal agencies.

Matt Inzeo, a spokesman for the Department of Health and Human Services, said the administration “strongly disagrees” with the opinion. The administration said it had discretion to decide how money should be allocated between insurers and the Treasury when the total amount available was — as in this case — less than expected.

Four and a half months before Thursday’s ruling, a federal district judge here ruled that the Department of Health and Human Services had illegally spent billions of dollars on a part of the health law that helps low-income people pay deductibles and other out-of-pocket costs for hospital care and doctors’ services.

In recent weeks, state insurance commissioners have approved rate increases of 25 percent or more for many insurers in 2017. Insurers say that premiums would be even higher without the extra payments from the federal government.

At issue is a program that collects fees from most insurers and uses the money to help pay high-cost claims for sicker people. The purpose of this temporary “reinsurance program” is to stabilize premiums and to encourage insurers to participate in markets under the health care law.

The 2010 law stipulates that some of the money “shall be deposited into the general fund of the Treasury of the United States and may not be used for the program” to provide financial assistance to insurance companies.

The auditors found that the Obama administration had flouted this requirement. Under the law, the government was supposed to collect a total of $25 billion from 2014 to 2016 and deposit $5 billion of that in the Treasury.

The administration set the amount to be contributed by each insurance company, but the total collections fell short of the amounts specified in the law. So the administration allocated almost all the money to insurers, “resulting in the deposit of no amounts in the Treasury,” the accountability office said.

The administration “may not use amounts collected for the Treasury to make” payments to insurance companies, said the ruling, signed by Susan A. Poling, the general counsel of the G.A.O.

The law “very clearly directs” the secretary of health and human services to deposit certain amounts in the Treasury, Ms. Poling said. “The fact that H.H.S.’s collections ultimately fell short of the projected amounts does not alter the meaning of the statute,” she added.

The ruling by the G.A.O. does not directly affect a separate program with a similar purpose that was meant to limit the financial losses of insurance companies under the Affordable Care Act. But it could complicate efforts by the administration to negotiate a settlement with various insurance companies that have sued the government, saying they received much less money than they were promised under this program.

Under the reinsurance program, the government was supposed to collect $12 billion in 2014, but actual collections totaled $9.7 billion. Courts have held that when funds fall short of expectations, a federal agency should try to achieve the “original statutory scheme” as much as possible.

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