The Obama administration failed to follow its own health reform law in a $5 billion dispute over compensating insurers for high costs from seriously ill patients, Congress' investigative arm says.
The opinion from the Government Accountability Office is a setback for the White House and bolsters Republican complaints that administration officials bent the law as problems arose carrying out its complex provisions.
The finding may complicate efforts to stabilize premiums in the law's insurance marketplaces, where about 11 million people get coverage.
The Obama administration said it strongly disagrees with the GAO's conclusion.
At issue is how the administration has handled a little-known, but important program called "transitional reinsurance." Working in the background of the law's coverage expansion, the three-year program collects fees from employer and other private health insurance plans and channels the money to health plans that face large claims for treating patients with catastrophic medical problems.
The law specified that the fee would collect $25 billion from 2014-2016, and $5 billion of that would go directly to the Treasury. But when fee collections fell short, the Health and Human Services Department failed to allocate a share of the money to the Treasury, saying it would do so later as more money came in.
Republicans cried foul and asked the GAO to examine the issue. On Thursday, Republicans got the ruling they had hoped for.
"HHS lacks authority to ignore the statute's directive to deposit amounts (collected under the program) in the Treasury," the GAO's general counsel, Susan Poling, wrote.
"The administration should end this illegal scheme immediately."
The administration's interpretation of the law "is inconsistent with the plain language of the statute," she said.
It didn't help the administration's case with GAO that the original HHS plan for distributing the fee money called for paying the Treasury.
Republicans accuse the Obama administration of shortchanging the Treasury to "bail out" the health care law.
"The administration should end this illegal scheme immediately, and focus on providing relief from the burdens of this law," Sen. John Barrasso, R-Wyo., said in a statement. Barrasso is a leader on health care issues.
Previously, Republicans have complained that the administration flouted the law when it delayed a requirement that larger employers must offer coverage to their workers.
Responding to Thursday's GAO opinion, the Obama administration said that the program was implemented "lawfully and in a transparent manner" and "helps to reduce premiums for consumers."
The GAO has no enforcement power over its ruling, but congressional opponents of the health law could use the finding to write legislation that forces HHS to pay the Treasury. Generally, lawmakers of both parties respect GAO's rulings on federal budget issues.
The reinsurance program is one of three financial backstops created by President Barack Obama's law to support insurers as they built their customer base in the new markets for subsidized private insurance. Reinsurance provides a safety net for insurers by helping to pay large claims, an important consideration for companies selling coverage to a customer pool they didn't know.
The marketplaces have been tough for insurers, due in part to less-than-promised support from a different government stabilization program. Insurers also say they've been swamped by higher-than-expected claims and by customers who sign up for coverage, use it on expensive care and then stop paying premiums. Major carriers such as UnitedHealth Group and Aetna have scaled back their role after forecasting annual losses that will top $300 million.
The health insurance industry is concerned over the escalating dispute between Republicans in charge of Congress and the administration.
David Merritt, a vice president of America's Health Insurance Plans, said the purpose of reinsurance is to protect the most vulnerable patients and keep coverage affordable for everyone else. Any changes to the program "will put consumers and their coverage at risk," Merritt said.