IRS doubted legality of ObamaCare payments, former official says

The IRS raised concerns in early 2014 about the legality of certain ObamaCare payments that Republicans are now challenging in a lawsuit, according to a deposition from a former agency official.  

David Fisher, who was the IRS’s chief risk officer, told the House Ways and Means Committee that agency officials questioned whether the Affordable Care Act provided the authority to make certain payments to insurers without an appropriation from Congress. 

{mosads}Most senior IRS officials ended up concluding that the payments were legal after a meeting with the White House to hear its legal justification, and the administration eventually went ahead with disbursing the funds.  

The Treasury Department declined to comment on the deposition, citing the litigation. 

Those payments, called “cost-sharing reductions,” are the subject of the lawsuit by House Republicans against the administration. A federal judge ruled this month that the administration overstepped its authority by making the payments without an appropriation from Congress, though the ruling will be appealed. 

According to Fisher, IRS officials questioned whether the healthcare reform law provided a “permanent appropriation” for the payments. The text of the law clearly provides one for ObamaCare’s tax credits, which help people pay insurance premiums, but does not specifically provide one for the cost-sharing reduction payments, which help people afford their deductibles. 

The administration went on to argue that the same authority that provides for the tax credits also covers the cost-sharing reductions because the structure of the law links the two “inextricably.”

But in early 2014, the IRS, which is responsible for distributing the payments, pointed out the lack of an explicit appropriation for the cost-sharing reduction.

“My understanding, through the accounting folks, is that the IRS had raised some concerns and was looking for, whether it was a legal analysis or something more authoritative that would provide confidence that these payments were, in fact, authorized out of the permanent appropriation,” Fisher said. 

Fisher said the IRS requested a meeting with the White House Office of Management and Budget (OMB) to get its perspective on the legality of making the payments. 

That meeting occurred on Jan. 13, 2014, at the Eisenhower Executive Office Building across from the White House, Fisher said, with officials from the OMB and the IRS. 

The IRS officials received a memo written by OMB attorney Sam Berger that laid out a legal justification for making the payments, Fisher said. He added that the IRS officials were told not to take notes and were not allowed to keep copies of the memo at the end of the meeting, an arrangement Fisher called “a little unusual.”

Fisher recalled the memo as “a lengthy, sort of, list of small justifications of individual things trying to identify why the administration believed that it was Congress’s intent to have the payments for both the [tax credits] and the cost-sharing reduction payment being made in the same manner.”

After that meeting, Fisher said, not many IRS officials were worried about the legality of the payments.  

But Fisher said he still had concerns, as did Gregory Kane, the IRS deputy chief financial officer. 

“Mr. Kane, I think, had some reservations still, even after, you know, reading the memo and going to the meeting,” Fisher said. “I don’t believe there was as much concern with most of the other folks.”

About a week after the meeting with the OMB, Fisher said, IRS senior staffers met with Commissioner John Koskinen to get his take on the legality of the payments before they went forward.  

Koskinen was informed of a memo, approved by Treasury Secretary Jack Lew and the Justice Department, that deemed the payments appropriate, Fisher said.

“And so there was a very strong consensus of the people who had been in the loop on this at, you know, fairly senior positions in government that these payments were appropriate,” Fisher said.  

Fisher said he voiced his doubts to Koskinen about the legality of the payments. Koskinen listened and thanked Fisher for expressing his opinion, according to Fisher. 

“Given the strong consensus to support that perspective that was presented to the Commissioner, I was certainly not surprised that he supported that with this level of senior advice given to him as, you know, what should we go do,” Fisher said. “He made the choice that I bet you 99 out of 100 people would have made. It’s just one that I happen to disagree with, in terms of my understanding of both appropriation law and my reading of the statute.”

Fisher pointed to the fact that ObamaCare lays out no permanent appropriation specifically for the cost-sharing reductions, despite arguments about the law’s overall structure.

The cost-sharing reduction payments, estimated at $130 billion over the next 10 years, help low-income enrollees pay the deductibles in health insurance plans purchased through ObamaCare.

Democrats argue that Republicans’ lawsuit over the payments and the investigation by the Ways and Means panel are just political attacks on the Affordable Care Act.

“More than 20 million Americans have health coverage today that didn’t previously thanks to the health reform law, yet the Republicans are doing everything in their power to take that away,” Rep. Sandy Levin (Mich.), the top Democrat on the Ways and Means Committee, said at a markup Tuesday during which the panel voted to release the transcript of Fisher’s deposition.  

Democrats on the committee released the full transcript of the deposition online after Chairman Kevin Brady (R-Texas) said Tuesday that he did not plan to release it in electronic form. 

Over 10 current and former government officials have been voluntarily interviewed as part of the committee’s investigation into the cost-sharing reductions since the beginning of the year, according to a committee Democratic aide. Fisher testified after the committee subpoenaed him. 

Republicans on the panel are preparing a report about the payments. Brady said that the investigation has been met with “unprecedented resistance” from the administration. 

Democrats counter that the investigation is unnecessary, given that the matter is already the subject of a lawsuit in which both sides have agreed that the facts are not in dispute.