• The legality of the congressional staffer Obamacare fix

    The following is a guest post by Nicholas Bagley, University of Michigan Assistant Professor of Law.

    Another week, another legal kerfuffle over the implementation of the Affordable Care Act. Everyone agrees that, per the ACA, members of Congress and their staffers will have to go to the exchanges to get health insurance. The burning question—as politically salient as it is economically trivial—is who’s going to pay for it.

    Like other large employers, Congress offers health insurance to its employees. But now that members and staffers must go on the exchanges, can Congress keep paying for that insurance? If not, members and staffers could still get federal subsidies (assuming they make less than 400% of the poverty level). Those subsidies, however, are tiny in comparison to the amount that Congress now spends for their health insurance. They’d face, in effect, an enormous pay cut (remember, employer-sponsored health insurance is a form of compensation). Some fear an exodus of staffers from the halls of Congress.

    Is this really what the law requires? Some critics think so. They’re already crying foul about a pending rule from the Office of Personnel Management (OPM) that, according to press reports, would allow Congress to continue financing its employees’ health plans. Never mind that the administration hasn’t released its rule, much less its legal justification for it. The emerging storyline touches on themes of executive lawlessness, congressional impunity, and a broken statute. That’s sexy stuff by health-policy standards.

    It’s also nonsense. All the ACA says is that “the only health plans that the Federal Government may make available to Members of Congress and congressional staff … shall be health plans that are … (I) created under this Act … or … (II) offered through an Exchange established under this Act.” §1312(d)(3)(D). That speaks to the kinds of health plans that members and staffers can get. But it says nothing—not one word—about prohibiting Congress from financing those health plans. To the contrary, the Act contemplates that Congress will still “make available” health insurance, strongly suggesting that it will continue to pay for that insurance.

    It’s silly to think that Congress used this spare language to indiscriminately and dramatically cut the compensation of its members and staffers. As Justice Scalia has quipped, Congress does not “hide elephants in mouseholes.” (Maybe this isn’t an elephant, but it’s at least a good-sized dog.) If there were any doubt on the matter, it’s black-letter administrative law that an agency charged with administering an ambiguous statute—here, that’s OPM—gets to resolve that ambiguity. That should be the end of the matter.

    Some have nonetheless argued that OPM, which is responsible for contracting with health-insurance plans on behalf of federal employees, doesn’t have the legal authority to contract with plans that are also offered on the exchanges. (“You can’t mix and match the two,” writes Peter Suderman at reason.com.) But why? Although there are some restrictions (they’re very general) on the plans that OPM can contract with, a health plan could in principle satisfy both OPM’s requirements and exchange requirements. So far as I can make out, no statute precludes the agency from contracting directly with exchange plans.

    Even if I’m wrong about that, look carefully at the ACA’s language. Members and staffers can buy not only health plans “offered through an Exchange,” but also plans “created under this Act,” whether or not they’re offered on an exchange. What health plans are “created under this Act”? Well, the ACA, in §1344, instructs OPM to contract with health insurers to offer at least two “multi-state plans” on each of the exchanges. The idea was that these OPM-sponsored multi-state plans would foster competition. Why couldn’t OPM contract with, and Congress contribute to, these multi-state plans—outside the purview of the exchanges altogether?

    Look, I have no idea how the administration will defend the new regulations that are apparently forthcoming from OPM. But even a cursory look shows that there’s more flexibility built into the ACA than the critics are willing to acknowledge. Before preemptively leveling accusations of illegality, maybe they should wait to see what the administration comes up with. I suppose the story then might not be as sexy; indeed, there might not be much of a story there at all. But it’s better to be right than provocative.

    • While I agree with your reasoning, there is language in ACA that limits participation of employers in SHOP exchanges by size, and the Act does not allow individuals to use tax-favored employer contributions to purchase in individual exchange. In fact, I believe Sen Wyden got a limited provision in the law to allow some workers to turn down employer plan and use employer subsidy in individual exchange, but it was one of the provisions that has been repealed since the ACA’s enactment.

    • Prof. Bagley,

      I’m sure you’re correct. But you’re discussing law and policy.

      The shouting about Obamacare is mostly politics. Big difference.

    • I think the legal argument is weak at best that Congress can use the FEHBP to subsidize these employees. As Anne points out, large employers got a “midnight deal under the table” amendment to the ACA in 2011 to prevent their younger and less expensive employees using the exchanges and tax subsidies rather than employer plans (see http://www.psfinc.com/press/2011-budget-compromise-eliminates-free-choice-vouchers). I believe this was the first amendment to the ACA. Its purpose was to continue to force younger employees to subsidize older employees in Fortune 500 companies, a decision that will cost hundreds of billions to younger workers. I bet the Administration wishes today that it had not agreed to this change, as it belatedly pursues publicity options to attract younger workers to exchanges!

      As to FEHBP subsidies continuing, the Heritage Foundation paper is very strong on this point and written by real FEHBP experts.

      As to exchange plans joining the FEHBP, please take it on faith (I am quite an expert on that program as any google on my name will show) that there is essentially no way that OPM can contract with an exchange plan or a multi-state plan without at the same time offering it to all federal employees, not just Congressional staffers. So this is potential “solution” will open another can of worms and is not likely at all. Moreover, to cover all the affected staff persons and Congressmen, OPM would have to contract with at least one exchange plan in all 50 states–ain’t gonna happen ever, and certainly not by January. Plan negotiations for 2014 are already essentially final.

      The real issue is tax-exempt premium support. Congressmen could raise pay of the individual affected staffers enough to cover exchange premiums. Individual staff pay levels in each office are set by each Congressman, and subject only to overall budget constraints. They are completely discretionary. Moreover, Congress already appropriates money for about 72% of health insurance premiums for its members and staff. So most of the money could come from one budget line and move to another under existing law. Congress could also raise its own pay, by statute. So the technical issue is not whether staff have to take a hit on take home pay.

      But that straightforward solution would hit individual Congressional office budgets, and require overt rebudgeting action. And the money would not be tax exempt (the typical marginal tax bracket for federal workers, including Congressional staff, is around 33% (all taxes, not just income tax). So there would be a hit on office budgets and no easy fix for the members themselves. Therefore, I suspect that the articles claiming that “the fix is is in” are correct. Lawyers at OPM and/or HHS will come up with some convoluted argument that tax free contributions can be made for enrollment in exchange plans that are not in the FEHBP (quite a contortion given the 2011 amendment and the FEHBP statute itself). The legal argument can be true or phony, but that won’t matter, since no one will have the standing to sue. That will put this decision into the same bucket as the IRS paying federal tax subsidies to persons who are not enrolled in plans established in State-run exchanges, a policy seemingly directly prohibited by the ACA.

      The irony is that “the fix is in” solution will be another nail in the “popularity of the ACA” coffin. Probably another penny-wise and pound-foolish solution. But perhaps common sense will prevail and the Congress will learn to live with the provision it enacted. Stay tuned!

      p.s. I do NOT agree with this provision of the statute. It was political grandstanding. No other employer in America is required to send employees into State exchanges. But in the zany world of the ACA controversies, sanity and reason are second class citizens.

    • In a world were what is written seems to matter very little – see delay in employer mandate and extension of subsidies to federally run exchanges, I think that congress can – and will find a way to get away with this. – BUT I for one am going to make sure they don’t pull this off without paying some cost for their actions. I have already registered my concerns with my senators and congressman – and am pretty sure I am not alone in doing so.

      WF may be right in this coming from congressional grandstanding – but that grandstanding was part of what it took to get this horrible piece of legislation passed. Right or wrong, many of us cannot understand why something so wonderful as the exchanges are good only for some of “us” and not good for “them”. I would support putting ALL federal workers in the exchanges – it would very likely help with the rate shock problem.

    • I think Congress should have to follow the law like the rest of us.
      Put all of Congress on the exchange plans and give them 1st hand experience with HMO’s plan that have narrow networks. Educate these people on what a per occurrence Inpatient & Outpatient Co pay is.
      Let them become very aware of the term “Requires Prior Authorization”.
      They passed this law and I think they should have to experience it.

    • There may be no one with standing to bring a suit, but this, like any other appropriation, has to get through Congress, which still includes the House. It would not be hard to imagine the House passing a provision that covers compensation for the targeted employees, but withholds funds for the subsidies, since they are now in exchanges. The House Republicans can make their arguments about the legality, while showing their constituents how they are holding the line.

      The Democrats would be in the position of having to defend an, arguably, illegal use of funds, soley for the benefit of the members and Congressional staff. Maybe they could get a compromise that the House would pass, maybe they could tie it to an entire “keep the government open” omnibus CR, but they are hardly free from political risk here.

      The provision, as it ended up, seems to make no sense.The Democrats could try to blame it on the Republicans for refusing to fix a bill that the Republicans voted against, many many times. The better political move might be to sweep this one under the table as far and as fast as possible. If they refuse to do anything other than eat the cost, constituents, and Republicans, are sure to point out that their premiums are going up, and they don’t see the Democrats rushing to help them out.

      Of course, those whose premiums are going down will not be complaining.

    • Well, they did it. Wednesday August 7 OPM published a proposed rule saying that while the affected Congress people and staff will have to switch to Exchange plans, their tax-free premium contributions can continue. This applies to active employees. Those who retire after January 1, 2014 will have to remain in their Exchange plan (it is unclear whether they can switch plans or have to stay in the same plan, or what happens if that plan disappears). It is also unclear if the Federal contribution continues. Lack of clarity probably means: “sayonara, sucker.” Stay tuned. The Wash Post article, with a link to the proposed rule, is here: http://www.washingtonpost.com/blogs/federal-eye/wp/2013/08/07/employer-health-premium-share-will-continue-for-hill-staff-forced-out-of-fehbp/