The Exchange

That Congressional Exemption From Obamacare? Another Myth

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“Why are Congress and their families exempt from the new plan?” a questioner named Paul asked in a recent Yahoo Finance Q&A on the Affordable Care Act. “If the coverage is inferior, why don’t they stand behind it?”

Of all the misconceptions surrounding the new health reform law known as Obamacare—and there are many—one of the newest and most infuriating is the idea that Congress made itself “exempt” from a law that puts onerous new burdens on many other Americans. That contention is totally false. In fact, members of Congress, along with their personal staffers, are required to participate in Obamacare, which is a more stringent requirement than employees of many big companies face.

The confusion is understandable. Earlier this year, Congress did, in fact, consider passing legislation that would amount to an exemption, though that never happened. Then, in August, Sen. Ted Cruz (R-Texas) said in a speech that “President Obama just granted all of Congress an exception. And he did it because Harry Reid and the Senate Democrats who passed this thing came begging and said, ‘Please, please, please let us out of Obamacare.’” Nobody actually saw Harry Reid begging, but the claim gained traction nonetheless, and a chain email containing bogus information about Congress being exempt from Obamacare started to circulate.

Here’s what really happened. When the Affordable Care Act became law in 2010, it included a passage that said: “The only health plans that the Federal Government may make available to Members of Congress and congressional staff … 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).”

In plain English, that means that at the end of this year, members of Congress and their personal staffs will no longer be eligible for the federal health care plan, and they’ll have to purchase insurance through an exchange instead. That requirement was initially proposed by Sen. Charles Grassley (R-Iowa), who opposed the law, as a kind of dare back in 2009, when legislators were still debating what would go in the bill. It caught on as a populist measure and made it into the final law.

Up until now, members of Congress, like all federal employees, have been able to select insurance from a government plan that’s similar to a lot of big-company plans, with one exception: It offers a lot more choices. In fact, the government plan, which has been in place for years, is remarkably similar to the exchanges established by the ACA.

The government, on average, pays about 75% of the premiums for members of Congress and other federal workers, while workers pay the other 25%. That’s comparable to what big firms kick in for coverage, says Paul Fronstin of the Employee Benefits Research Institute.

With members of Congress and their staffs being forced to buy insurance on the exchanges beginning in 2014, the real question regarding Congress is how the government can continue to offer some sort of health care benefit for those federal employees, the way most big employers do, since it can no longer cover a portion of the premium. Few, if any, Congressional staffers would qualify for the low-income subsidies. That means their net insurance costs would rise considerably if they were forced to buy from an exchange with no support at all from their employer. The basic idea is to make Congressional employees whole by giving them a new benefit that’s more or less equal to what they’ll be losing when they can no longer participate in the government’s health care offerings.

The Office of Personnel Management, which is the government’s HR department, finally decided this summer that the government will give Congressional employees a tax-free subsidy roughly equivalent to the value of the benefit they’ve been getting until now. That will help offset the unsubsidized cost of insurance bought through an exchange. This rule led the conservative Heritage Foundation to declare that the OPM exceeded its authority by offering subsidies for a health plan it doesn’t administer, resulting in a “special Obamacare deal to Congress.” Cruz apparently picked up on that, and another Obamacare myth was born.

It’s hardly surprising that ordinary people might suspect Congress of exempting itself from its own law, given their recent antics of late and record-low approval ratings. Plus, there’s rampant misunderstanding of what Obamacare actually requires. The most basic rule is that all Americans, with only a few exceptions, must have health insurance, or pay a penalty. People who already have insurance, through an employer or any other source, already comply with the law.

Consumers without insurance can get it any way they choose. The exchanges were set up as a way to pool insurance and, in theory, offer lower rates to people who can’t get it through an employer. Plus, applying through an exchange is the only way to get federal subsidies for people whose income falls below certain thresholds. There’s no requirement for anybody to buy insurance through an exchange, but it’s likely to be the best deal for many consumers, because of the subsidies. Congressional employees are an exception.

As for President Obama, the law doesn’t require him or any other federal employees to do anything different, so they’ll continue to get the same insurance options the same way they’ve been getting them. In fact, Obama probably couldn’t enroll in the program bearing his name even if he wanted to, since he already gets insurance from his employer. When Obama leaves office in 2017, however, he’ll get the chance to enroll in the very program he has extolled, finally making it “Obamacare” for real.

Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.

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