Waivers for Obamacare Not Based on Political Considerations, Obama Administration Official Says

By Fred Lucas | March 17, 2011 | 4:12 AM EDT

In this Sept. 21, 2010, file photo Rep. Darrell Issa, R-Calif. stands next to a painting of American Republican presidents during an interview with The Associated Press, in his office on Capitol Hill in Washington. (AP Photo/Manuel Balce Ceneta, File)

Washington (CNSNews.com) – Political considerations did not play a role in determining which companies, unions, and non-profit groups received waivers from the new health care law, a top Obama administration official said on Tuesday. So far, the Department of Health and Human Services (HHS) has issued 1,040 waivers from Obamacare.

“Unions have actually fared worse than the other applicants,” Steve Larson, director of the Center for Consumer Information and Insurance Oversight in the HHS, told CNSNews.com after testifying before Congress.

“For example, unions are about 2 percent of the approved applicants, and they are 5 percent of the denied applicants,” Larson said. “So I think when you look at the facts there is no basis whatsoever that unions are somehow – I’m just saying we review the applications based on criteria.”

Organized labor groups such as various chapters of the Service Employees International Union, the International Teamsters, and the United Food and Commercial Workers were allowed to impose caps on health insurance spending.

According to the breakdown on the HHS Web site, at least 237 of the waiver recipients have gone to organized labor organizations, based on the “multi-employer plans” and the “non Taft-Hartley plans.”

Larson defended the 1,040 waivers granted to the Patient Protection and Affordable Care Act, also known as Obamacare, in front of the House Oversight and Government Reform Subcommittee on Health Care, District of Columbia, Census and the National Archives.

“We do not favor any particular type of applicant or an applicant from any type of sector,” Larson testified. “We’ve applied the standards fairly across all of the applicants.”

Rep. Elijah Cummings (D-Md.), miffed at Republican suggestions of impropriety, asked Larson, “Is political support for Obama and health care reform a factor your office uses in evaluating applications for annual limit waivers?”

“It is not,” Larson said.

“You understand you’re under oath?” Cummings followed.

“I do, sir,” Larson said.

“I think that will be it. I yield back,” Cummings said.

Rep. Terry Gowdy (R-S.C.), chairman of the subcommittee, said allowing waivers did not treat entities equally.

“Waivers to the health care law have implications – implications that demand transparency and accountability from the federal government,” Gowdy said. “In order for companies to compete on a level playing field, they must know the burden of proof, the standards their applications will be evaluated by.

“They must know why certain applications were accepted and others were not. There must be an identifiable process, not an elaborate morass of vague standards with no statutory definitions,” Gowdy added.

The health care law eliminates annual caps, or limits on how much an insurance plan will pay in benefits for an enrollee in any given year, by 2014. Under the law, the HHS is now phasing out those coverage caps. Under HHS regulations, annual limits can be no less than $750,000 for 2011, no less than $1.25 million in 2012, and no less than $2 million in 2013.

The waivers, however, allow health insurance plans to cap how much they will spend on a policy holder’s medical coverage for a given year. Under Obamacare, such annual limits are phased out by the year 2014.

The number of waivers grew from zero in September of last year to 222 by the end of 2010, and 733 at the end of January to 1,040 on March 4, the most recent release of waivers.

Larson said that HHS has approved 94 percent of waiver applications, but he said this is a miniscule number compared to the number of companies carrying insurance.

“Since setting up this program, CCIIO has granted waivers to approximately 2.6 million people out of 160 million people who have employer-sponsored health coverage,” Larson said. “The figure is 2 percent of all covered lives in the private insurance market.”

In September, HHS announced it would grant waivers to employers to prevent some workers from losing their benefits if the insurer could not meet Obamacare’s requirements on annual limits.

The waivers are granted by HHS if the department determines “compliance with the interim final regulations would result in a significant decrease in access to benefits or a significant increase in premiums,” according to Larson’s Sept. 3 memo.

Rep. Darrell Issa (R-Calif.), chairman of the full oversight committee, complained about a process “2 percent versus the rest of America.” He and Larson had an exchange.

“If it doesn’t matter whether somebody is unionized or not, why would you put an SOP [standard operating procedure] to recognize whether they are covered under a union plan? What is the purpose?” Issa asked.

“The purpose in setting up the categories is depending on the applicant, for example, if the insured plan allows you to have premiums that are associated with the coverage, if you have, for example a self-insured plan, in some cases a collective bargaining plan, you will have premium equivalence,” Larson said.

Issa responded, “In the case of unions, the people granting waivers know who they are approving and know what their category is. Right?”

Larson said, “They’re aware how the claims are categorized but it doesn’t impact how they decide.”

Issa said, “Obamacare is an abysmal failure, and people are being hurt out there by rising health costs, and then there is a waiver program that seems to select winners and losers fairly arbitrarily. How do you defend that process? More importantly, how do you know you are effectively reaching out to all of those who might be entitled to the lottery of can I opt out or not?”

Larson answered, “Well, it’s a great process. We have 30 percent of the small businesses that are approved were able to maintain coverage.”

Issa later said in the exchange, “I’m astounded that we’re having a hearing and every answer is, we don’t know, we’ll check into it, we think the process is fair, we don’t have an answer to that, we don’t think that’s true.”

HHS granted waivers to at least 10 health insurance companies, including giants such as Cigna and Aetna and divisions of Blue Cross Blue Shield.

The waivers are neither justified by statute nor do they build public confidence, said Edmund F. Haislmaier, senior fellow for the Center for Health Policy Studies at the Heritage Foundation, a conservative think tank.

“The first problem is that it appears that HHS has exceeded its statutory authority in creating the waiver process,” he said. “The statute does not explicity grant HHS authority to waive the application of the provision. In contrast, I count 21 other sections of PPACA [health care law] in which Congress did grant HHS explicit, new waiver authority with respect to specific provisions.

“Thus, it is reasonable to presume that if Congress had intended the department to institute a waiver process as part of its implementation of this particular provision, Congress would have said so in the statute,” Haislmaier added.

Haislmaier further said the waiver process is bad policy because it creates unequal burdens on different businesses, and that large corporations that can afford to go through the process would have an advantage over small companies that lack the resources. Further, he believes it could create ethical problems.

“It creates at least the perception – and possibly the fact – that regulatory enforcement is being subordinated to administration political priorities or concerns,” he said.

He added, “It creates the opportunity, and the temptations for administration officials to apply the law corruptly or to engage in political favoritism when making enforcement decisions. Even if actual enforcement is not in fact tainted, the existence of the regulatory process that appears to invite such a possibility needlessly raises suspicions and undermines public confidence in the rule of law.”