Health Republic Insurance of New York paid K Street lobbyists to help it secure $90 million in federal “solvency funds,” allowing the Obamacare health insurance co-op to stay afloat last year, according to congressional lobbying disclosure records.
Quarterly documents obtained from the clerk of the United States Senate by the Daily Caller News Foundation’s Investigative Group show Health Republic paid $180,000 to the lobbying firm of Alston & Bird. The payments were made from early 2014 through the first quarter of this year.
Alston & Bird did not merely lobby Congress, according to the documents. They also lobbied federal officials at the Center for Medicare and Medicaid Services, which manages Obamacare.
Health Republic last year asked CMS to provide an additional $90 million in “solvency funds” to the co-op. CMS officials approved the request last September, five months after Alston & Bird began their lobbying of agency officials.
Health Republic originally received $265 million in start-up funding in 2012, making it the largest of two dozen health insurance co-ops established under an Obamacare program designed to provide publicly funded competition for private sector health insurance firms. Healthcare reform advocates said the co-ops would offer lower premiums for comparable coverage.
Heading up Health Republic’s Washington lobbying is former U.S. Rep. Earl Pomeroy, a nine-term North Dakota Democrat, who manages the K Street firm’s health care lobby shop.
Bob Siggins, a former long-time congressional staff aide for the congressman and once his chief-of-staff followed Pomeroy to join Alston & Bird. Siggins also lobbies for Health Republic, according to the documents.
Pomeroy claimed his lobbying on behalf of the federally funded co-op was “completely appropriate” and that the lobbying firm continues the work on the co-op’s behalf.
Federal law forbids a recipient of federal funds “to pay any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with any federal action.”
CMS stated in its Dec, 13, 2011, final rule governing the co-ops that “no portion of the loans be used for propaganda purposes, attempts to influence legislation, or marketing.”
Federal rules also direct all co-ops to “to use any profits to lower premiums, improve benefits, or for other programs intended to improve the quality of health care delivered to its members.”
Obamacare co-ops like Health Republic rely almost exclusively on tax dollars. The CMS awarded $2 billion to 24 proposed co-ops in 2012. The money was to be used for start-up costs and insurance capitalization.
Health Republic has filed its tax returns as a 501(c)(6) tax-exempt business league organization, but it and the other Obamacare co-ops also conform to the 501(c)(29) designation established specifically for them. Health Republic filed as a (c)(29) in 2011, but the IRS regulations for the (29) designation – which bar the co-ops from lobbying Congress – weren’t finalized until this year.
The (c)(6) designation permits lobbying, but the funds used for that purpose are not tax-deductible and may be subject to a special tax on the organization.
“If they rely 100% on federal taxpayer dollars, they are prohibited from using those funds to lobby agencies or members of Congress,” said Scott Amey, general counsel of the Project on Government Oversight, a non-profit government watchdog. “Lobbying cannot be paid for with taxpayer dollars.”
Aaron Albright, director of communications at CMS did not respond to repeated DCNF questions about the co-op lobbying.
The National Alliance of State Health CO-OPs, the Obamacare creation’s trade association, also did not respond to DCNF questions about the legality of co-op lobbying.
Many of the Obamacare co-ops have compiled less-than-stellar records, as was predicted by the White House Office of Management and Budget, which projected in 2010 that nearly half of the groups would fail.
The insurance commissioner in Vermont refused to license the Obamacare co-op there in 2013. And the Iowa-Nebraska co-op was dissolved under state receivership early this year.
Health Republic, however, claimed to be among the most successful Obamacare co-ops, capturing one-third of New York’s Obamacare exchange customers.
The co-op was founded by Sara Horowitz, a well-known liberal New York political activist who once worked with then-state senator Barack Obama at a New York think tank partly funded by billionaire George Soros.
Horowitz also was the only individual approved by CMS to launch Obamacare co-ops in three separate states. Her groups received $434 million from CMS to launch co-ops in New York, New Jersey and Oregon.
Despite the substantial federal funding, Health Republic executives discovered last year that they did not have enough capital on hand to meet New York’s capital reserve requirements.
Alston & Bird’s disclosure forms describe the firm’s lobbying of Congress and CMS on behalf of Health Republic for the solvency funds.
According to CMS officials, a request for solvency funds represents a co-op’s attempt to meet “state determined reserve requirements.”
If a co-op’s capital reserves are being depleted too quickly or fall rapidly to unacceptable levels set by insurance regulators, there may be a need for the additional funds.
It is unclear what went wrong at Health Republic last year. However, Horowitz ran another non-profit health insurance company in New York called Freelancers Insurance, which she closed in 2014.
The New York Department of Financial Services ranked Freelancers among the poorest insurers in the state, placing 31st among 34 insurers in the number of complaints received by state officials in 2013, it’s last full year in operation. Freelancers also had the highest reversal rate for grievances filed by doctors, hospitals and other medical providers.
Thomas Miller, a health expert and resident fellow at the American Enterprise Institute said Health Republic’s decision to hire a high-priced lobbying firm indicates “they were pulling out all of the stops.”
The request for solvency funds is “a warning sign not only that they’re having trouble right now but it’s a preview of what would be a continuing chronic future.” He said, “they’re simply throwing more good money after bad.”
Consumer Mutual Insurance of Michigan reported paying $13,000 in lobbying fees to MJ Capitol Consulting. The Michigan co-op received $71 million in CMS funding and also sought solvency funding but did not get it.
The Colorado Health Insurance Cooperative received $72 million from CMS and paid $20,000 this year to Thorn Run Partners for unspecified lobbying on “issues relating to CO-OPs.”
Spokesmen for the Colorado and Michigan co-ops did not respond to DCNF calls.
UPDATE: Health Republic denies wrong-doing
Health Republic spokesman Michael Fagan tried to provide the following to DCNF prior to publication, but sent it to an incorrect email address: “Health Republic has not used federal loan funds to retain Alston and Bird, or otherwise engage in efforts to influence legislation.”