No, Health Care Waivers Aren't Proof Of Pelosi's "Crony Politics"

May 19, 2011 9:19 am ET

About 20 percent of the Health and Human Services (HHS) Affordable Care Act waivers granted in the month of April went to businesses in House Minority Leader Nancy Pelosi's (D-CA) congressional district. Thanks to a freakout in the right-wing blogosphere and the willful negligence of a number of prominent Republicans, that fact has been blown severely out of proportion, resulting in people like Tim Pawlenty, disgraced former House Speaker Newt Gingrich, and former half-term Alaska Governor Sarah Palin leveling wild accusations of "crony politics." But according to everyone who actually knows anything about the issue — including both the applicants for and grantors of the waivers — Pelosi had nothing whatsoever to do with the waivers in her district. Instead, they were granted in compliance with HHS standards, and were necessitated by a local law that means some California businesses need a little extra time before coming into compliance with the health care reform law.

GOP Claims Health Care Waivers In Pelosi's District Are Evidence Of "Crony Politics"

Pawlenty: Health Care Waivers Are "Crony Politics." According to The Hill:

[Tim] Pawlenty, the former Minnesota governor, said the fact that companies are seeking - and getting - exemptions from key parts of President Obama's healthcare law is a sign it's broken. 

"Another example of really crony politics or crony capitalism, if you've got the right connections, the right lobbyists, the right interest group, you get your special deal, and the rest of us get our wallet out, and that's in the tax code, it's in earmarking, and now you see it in ObamaCare," he said on Fox News. [The Hill, 5/18/11]

Gingrich Criticized Waivers As "A Fundamental Violation Of The Rule Of Law." From a Newt Gingrich letter on Human Events:

Obamacare empowers the Secretary of HHS to issue waivers that exempt companies and organizations from the law's many expensive and onerous requirements.  To date, HHS has issued over a thousand waivers, including ones to Big Labor and other powerful supporters of the Democratic Party.  This is all profoundly unfair to the millions of small businesses who lack the money and resources to influence Washington.

Yesterday, a report emerged that showed nearly 20% of the new waivers issued by HHS are in Nancy Pelosi's congressional district.

This arbitrary "rule by waiver" is a fundamental violation of the rule of law. In fact, it absolutely negates the rule of law, replacing it with the rule of HHS Secretary Sebelius, Obama, and the Democratic Party. [Human Events, 5/18/11]

Palin: Waivers Are "Corrupt" And "Crony Capitalism." From The Daily Caller:

In response to the revelation that about 20 percent of the latest slew of Obamacare waivers went to luxurious restaurants, nightclubs and hotels in House Minority Leader Nancy Pelosi's district, former Alaska Gov. Sarah Palin told The Daily Caller the waiver process is "corrupt."

"Unflippingbelievable! No, wait, it is believable," Palin said in an email to TheDC. "Seriously, this is corrupt. And anyone who still supports the Pelosi-Reid-Obama agenda of centralized government takeovers of the free market and the corresponding crony capitalism is, in my book, complicit." [The Daily Caller, 5/17/11]

Benefits Administrator, Not Pelosi, Requested Waivers In Pelosi's District

CBS News: Corruption Claims "A Stretch At Best" Since 90 Percent Of All Waivers Were Approved. From CBS News: "The corruption claims, however, appear to be a stretch at best: More than 90 percent of all waiver requests have been approved by the HHS, and officials explain to Hotsheet that these particular businesses simply applied for a waiver." [CBS News, 5/17/11]

HHS: Waivers "Submitted Directly To The Obama Administration Through A Third-Party Company." According to Mother Jones: "In fact, the recent waiver applications from businesses in Pelosi's district were not even received by the minority leader's office. Rather, they were submitted directly to the Obama administration through a third-party company, Flex Plan Services, which provides benefit administration to companies in the Bay Area, Washington state, and elsewhere in the country, according to a statement issued by Richard Solarian, an assistant HHS secretary." [Mother Jones, 5/17/11]

Flex-Plan Founder: Waivers Requests Made By Flex-Plan Services, Not Pelosi. According to the Huffington Post: "Flex-Plan Services, a third-party benefits administrator based in Bellevue, Wash., made the formal applications for waivers from President Barack Obama's health care law, said it[s] founder, Hilarie Aitken." [Huffington Post, 5/17/11]

Waiver Requests Approved For All Flex-Plan Clients, Not Just Pelosi's District. According to Mother Jones: "On March 23, Flex Plan Services submitted applications for annual limit waivers for their clients' health plan, including 69 businesses in California, 20 in Washington state, two in Georgia, and one in Alaska, including restaurants, home health care providers, and other service-based companies. On April 4, the U.S. Department of Health and Human Services approved the waiver request for all of Flex Plan Services' clients-not just the ones in Pelosi's district." [Mother Jones, 5/17/11]

Flex-Plan Founder: Waivers Have "Nothing To Do With" Pelosi "At All." According to the Huffington Post:

House Minority Leader Nancy Pelosi (D-Calif.) played no role in the process by which health care waivers were granted to a number of businesses in her district, according to the company that actually requested the waivers on behalf of its clients. [...]

"I don't tend to vote Democratic, but I feel bad for Nancy Pelosi," Aitken told HuffPost. "She's really being thrown under the bus here. It has nothing to do with her at all. This was just a political power play. The way that they are shaping this -- that the minority leader, Nancy Pelosi, [is behind] all these waivers being granted, and how could she do this -- it's all slanted and wrong". [Huffington Post, 5/17/11]

Pelosi District Waivers Needed Because Of Misalignment Between Local Law And Health Care Reform

Waivers In Pelosi's District Because Of "Local Law Rubbing Against The New National Legislation." According to the Huffington Post: "In actuality, Aitken explained, the high percentage of waivers is the byproduct of local law rubbing against the new national legislation. In April 2008, San Francisco passed an ordinance requiring employers to spend a minimum amount per hour on health care for their employees who work in the city." [Huffington Post, 5/17/11]

Companies That Set Up HRAs To Comply With Local Law Wanted Waivers Because ACA Would "Completely Eliminate The Benefit" Of HRAs. According to the Huffington Post:

In response [to a San Francisco ordinance], a number of eateries chose to set up Health Reimbursement Arrangements, which are essentially pools of funds set aside by employers to reimburse medical expenses paid by employees.

HRAs are serviced by a third-party administrator or plan service provider. They are also subject to the annual limit provision in the national health care law, which is set at $750,000 in 2011 before it is eliminated fully in 2014.

Like many self-insurance policies and union organizations, employers using HRAs have been applying for a waiver from this provision, arguing that application of the requirements would "completely eliminate the benefit" of setting up the HRA in the first place, Flex-Plan Services said. When they do so, they turn not to lawmakers like Pelosi or to the employers themselves, but to third-party administers like Aitken's company. [...]

On January 7, 2011, Flex Plan first requested waivers for its clients. In a letter to the HHS, the company's attorney Tina Ann Davis, wrote that, "[m]any of our HRAs were implemented by employers to satisfy local law requirements, provide coverage that otherwise would not be offered, or to help employees with their out-of-pocket medical care costs," the letter reads. "HRAs allow these employers to comply with the local law while providing an affordable health care benefit to their employees." [Huffington Post, 5/17/11, emphasis added]

Waivers In Pelosi's District Approved All At Once Because Applications Were Submitted All At Once. According to Mother Jones: "In other words, the reason the waivers were clumped together was because Flex Plan Services-which is in charge of administrating all of these businesses' health care benefits-had issued a waiver request for the entire group of businesses. Altogether, the Obama administration has granted 1372 waivers and has denied about 100 requests." [Mother Jones, 5/17/11]

No Evidence Of Inconsistency Or Partisan Bias In Granting Waivers

Groups That Did Not Support Health Care Reform Have Used The Waiver System To Their Benefit. FactCheck.org noted:

As of Dec. 3, the federal government had approved a total of 222 one-year waivers that allow the insurance plans at companies like McDonald's, Jack in the Box and Ruby Tuesday, and unions, to ignore the requirement on annual limits. Far from being "Obama's buddies," as the Internet post claimed, the restaurant industry, through the National Restaurant Association, opposed the legislation. [FactCheck.org, 12/7/10]

  • Even Groups With Republican Party Ties Are Able To Get Waivers. A. Duda & Sons, Inc.'s Senior Vice President of Real Estate and General Counsel, Tracy Duda Chapman, was on the transition team of Adam Putnam, a former chairman of the House Republican Conference now serving as Florida's agriculture commissioner. A. Duda & Sons, Inc. was granted a waiver. [Duda.com, accessed 5/19/11; SunshineStateNews.com, 11/5/10; AdamPutnam.com, accessed 1/21/11; HHS.gov, Waiver List, 12/03/10]

Standards For Acquiring A Waiver Are Published Online. The U.S. Department of Health & Human Services published guidance on their "annual limit waivers" and the established standards they use to review waiver applications. [HHS.gov, accessed 3/21/11]

HHS: Waiver Applicants Must Certify That Waiver Is Necessary To Prevent Reduced Access To Coverage Or Large Premium Increases. From the Department of Health and Human Services website:

The Affordable Care Act is designed to provide Americans with affordable, high-quality coverage options -- while ensuring that those who like their current coverage can keep it. Unfortunately, today, limited benefit plans, or "mini-med" plans are often the only type of insurance offered to some workers. In 2014, the Affordable Care Act will end mini-med plans when Americans will have better access to affordable, comprehensive health insurance plans that cannot use high deductibles or annual limits to limit benefits. In the meantime, the law requires insurers to phase out the use of annual dollar limits on benefits. In 2011, most plans can impose an annual limit of no less than $750,000.

Mini-med plans have lower limits than allowed under the Affordable Care Act. While mini-med plans do not provide security in the event of serious illness or accident, they are unfortunately the only option that some employers offer. In order to protect coverage for these workers, the Affordable Care Act allows these plans to apply for temporary waivers from rules restricting the size of annual limits to some group health plans and health insurance issuers.

Waivers only last for one year and are only available if the plan certifies that a waiver is necessary to prevent either a large increase in premiums or a significant decrease in access to coverage. In addition, enrollees must be informed that their plan does not meet the requirements of the Affordable Care Act. No other provision of the Affordable Care Act is affected by these waivers: they only apply to the annual limit policy. [HHS.gov, accessed 3/21/11]

Administration Says The Waiver Process Is "Administered Fairly Without Regard To The Type Of Applicant Or Size Of Business." At a House Oversight subcommittee hearing, Steve Larsen, the Deputy Administrator and Director of the Centers for Medicare and Medicaid Services' Center for Consumer Information and Insurance Oversight, said of the administration of waiver requests:

LARSEN: All employers and insurers that offer limited benefit plans may apply for a waiver if they demonstrate that there will be a significant increase in premiums or a significant decrease in access to coverage without a waiver. Applying for a waiver is simple, basic, with only five elements that CCIO has clearly published on our Web site. It's important to note that more than 30 percent of applicants have fewer than 100 enrollees. Small businesses are able to take advantage of this as well as large ones.

We administer the process fairly, without regard to the type of applicant or size of business. We published our standards for reviewing the applications in the regulations implementing the law, and again in the bulletins implementing the regulations. [Hearing of the Health Care, District of Columbia, Census and the National Archives Subcommittee of the House Oversight and Government Reform Committee, 3/15/11, via Nexis]

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