Congressional Staff to Feel ObamaCare Pain in 2014

Chuck Grassley

If you can’t beat them, force them to join their own thing.

That may as well have been Senator Chuck Grassley’s (R-IA) motto in 2009 when he introduced an amendment to PPACA to force members of Congress and their staff onto the ObamaCare exchanges.  In the private sector, this practice of dropping large employee groups or terminating employer-sponsored group health plans is referred to as “dumping” employees onto the ObamaCare exchange.  Congress and its staff will certainly feel dumped on come January 1, 2014, when they’re left to fend for themselves in the world of government-driven healthcare.

What is the FEHBP?

The Federal Employees Health Benefits Program (FEHBP) is the group health plan for federal government employees.  It’s the largest employer-sponsored plan in the country, covering 8 million enrollees.  That’s roughly the size of the entire population of the entire Commonwealth of Virginia.

Why Members of Congress and Staff Lose FEHBP Coverage as of January 1, 2014

PPACA Section 1312 explicitly requires that they go to the ObamaCare exchange:

(i) REQUIREMENT.—Notwithstanding any other provision of law, after the effective date of this subtitle, the only health plans that the Federal Government may make available to Members of Congress and congressional staff with respect to their service as a Member of Congress or congressional staff shall be health plans that are—
(I) created under this Act (or an amendment made by this Act); or
(II) offered through an Exchange established under this Act (or an amendment made by this Act).

(Note: If you’re wondering what a health plan “created under this Act” under subsection (I) is, you’re not alone.  Even the Congressional Research Service (CRS) couldn’t figure that one out.)

So Now They’ll Suffer Like the Rest of Us?

True, but we have no expectation of grandeur when it comes to our relationship with the federal government.  Congressional staff, although perhaps not extravagantly compensated, moves with the pack of Washington elites.  They live and breathe the inner circle of what has become the predominant power brokers of modern American society.  Part of the benefit of that proximity to centralized authority has been access to the FEHBP, one of the premier employer-sponsored group health plans in the country.  And here’s another key benefit: The feds as employer pitch in an average of 72% of the cost of the premium.

What’s the Problem?

Like most of PPACA, Section 1312 was poorly drafted.  First of all, they forgot to include an effective date.  The CRS essentially came to the conclusion that it should probably be January 1, 2014 because, after all, if would be hard to dump members and staff onto the ObamaCare exchanges before before they exist.

And now that 2014 is imminent, staffers are starting to freak.  As reported by Politico, there may be a mass exodus of staffers looking to avoid the ObamaCare treatment.  Not only will they be losing their “Cadillac” FEHBP coverage, but it also appears they’ll be losing that crucial 72% government contribution to the premium.

Which brings us to the second major drafting flaw in Section 1312: They unintentionally made it impossible for the government to contribute to the staff’s premium cost.  Ezra Klein at Wonkblog dug up the actual description of the Grassley amendment (see page 17), evidencing the intent that the same employer contribution would apply to ObamaCare exchange coverage:

“This amendment would require that, notwithstanding any other provision of law, beginning in 2013, Members of Congress and Congressional staff must use their employer contribution (adjusted for age rating) to purchase coverage through a state-based exchange, rather than using the traditional selection of plans offered through the Federal Employees Health Benefits Plan (FEHBP).”

CRS came to the same conclusion that Section 1312 was intended to retain the 72% employer contribution to the premium.  What everyone failed to account for was that other provisions in the very same PPACA destroy the tax-advantaged vehicle that could have preserved the employer contribution for members’ and staffers’ coverage on the ObamaCare exchanges.

Stand-Alone HRAs Prohibited in 2014

A health reimbursement arrangement (HRA) is an employer-sponsored group health plan that allows employers to credit a fixed pre-tax dollar amount to employees for health expenses.  ObamaCare is not kind to such consumer-driven health vehicles.  PPACA Section 2711 prohibits group health plans from imposing dollar annual limits as of 2014.  An HRA by its account-based nature includes dollar annual limits.  The Departments responsible for implementing ObamaCare have permitted HRAs to continue only if they’re “integrated” with other major medical coverage, but that other coverage must be another employer-sponsored group health plan.

The ObamaCare exchanges offer individual health policies.  This means the federal government can’t use an HRA to fund the employer share of the congressional members’ and staff’s premium on the ObamaCare exchanges.  This is no small problem.  The U.S. Chamber of Commerce recently wrote a letter to the same Departments pleading for them to allow employers to consider HRAs integrated with individual policies.  Employer contributions for ObamaCare exchange coverage would otherwise be taxable to the employee.

What This Means for Congressional Staff

Without any employer contribution (at least not on a pre-tax basis), staffers will have to rely on ObamaCare subsidies for help affording the massive premiums for ObamaCare exchange coverage larded with endless expensive mandates. According to Politico, staffers make between $35,000 and roughly $170,000.  Exchange subsidies cut off at 400% of the federal poverty level, which is $45,960 in 2013 for a single individual.

In other words, on top of losing their sweet FEHBP coverage with generous employer contribution, most staffers will likely receive minimal or no subsidies for their high-cost ObamaCare exchange coverage.

Worst of all, they’ll likely have to pay the full amount of the premium with after-tax dollars.  Because they’re not paying for the premium through an employer payroll, they can’t take advantage of Section 125 to pay the premiums on a pre-tax basis.  And PPACA increases the threshold for deducting medical expenses to amounts that exceed 10% of adjusted gross income (up from 7.5%).  I haven’t even mentioned that young staffers will get nailed by the 3:1 age rating limit on premiums.  Starting to make sense why they might be leaving?

OPM Ruling Still to Come

ObamaCare’s laundry list of victims is too long to list here.  But in this case it will be fascinating to see how a provision that directly affects members of Congress (who, let’s be real, will be fine) and their staff (who will actually be hurt by this) influences the politics of repeal going forward.  At a minimum, it may be the best chance we have to get Congress to save HRAs, which are crucial to the efforts to promote consumer-driven healthcare.

Apparently the Office of Personnel Management (OPM) will be issuing a ruling in the coming months on how it plans to implement this aspect of ObamaCare for Congress and its staff.  At this point, it looks like they’re going to be stuck with the same harsh ObamaCare reality as rest of us in 2014.  We can thank Sen. Grassley for that small slice of just deserts.

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