In a letter to the Galen Institute, former White House Counsel C. Boyden Gray addresses HHS’s claimed authority to divert billions owed to the United States Treasury to eligible insurance issuers under the Affordable Care Act’s Transitional Reinsurance Program. HHS initially announced that it would distribute funds collected under the program to Treasury and issuers on a pro rata basis. But HHS quickly changed course and decided to allocate funds to Treasury only if funds remained after making payments to issuers. In operation, HHS has generally underfunded the program, meaning there is usually little or nothing left over for Treasury. By the time the program ends next year, Treasury will have received between $4.5 and $3.5 billion less than provided for in the ACA.

In his letter, Gray concludes that HHS’s prioritization scheme is impermissible. The statute does not give HHS discretion to operate the program in a way that generates persisting deficits. In any event, HHS has never persuasively explained why a statute that requires “each issuer’s” annual contribution to “reflect” its “proportionate share” of defined amounts owed to Treasury authorizes it to pay out all of an issuer’s contribution amount to other issuers. Such a result is fundamentally at odds with the text of the ACA.

160523 – Reinsurance Opinion Letter (final)