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A Project of The Annenberg Public Policy Center

Is It ‘Illegal’ for Sebelius to Buy Exchange Plan?

Health and Human Services Secretary Kathleen Sebelius says “it’s illegal” for her to obtain insurance on the exchanges set up by the Affordable Care Act. Rep. Cory Gardner — a Colorado Republican who asked Sebelius why she isn’t in the exchange — accused her of lying.

Turns out, she’s right — although Gardner could not have known that by what Sebelius told him at the hearing.

Although she didn’t explain it to Gardner, Sebelius is enrolled in both Medicare and the Federal Employees Health Benefits Program. Her office later issued a statement that said: “Marketplace plans may not be sold to a Medicare enrollee, and the Secretary is a Medicare enrollee.”

The office referred us to the first question of an FAQ sheet issued on Oct. 4 by the Centers for Medicare & Medicaid Services:

Q1: Can individuals who have Medicare enroll in coverage through the Marketplace?

A1: No. Consistent with the longstanding prohibitions on the sale and issuance of duplicate coverage to Medicare beneficiaries (section 1882(d) of the Social Security Act), it is illegal to knowingly sell or issue a Qualified Health Plan (QHP) to a Medicare beneficiary. This prohibition does not apply in the Small Business Health Options Program (SHOP) market.

Sebelius’ exchange with Gardner occurred after about three hours of testimony on the problems with the federal health exchange website that have made it difficult if not impossible for many Americans to enroll in the new plans.

Gardner fired questions at Sebelius about why she isn’t losing her insurance and why she isn’t in the exchange.

Her initial response — “Because I’m part of the federal employee health benefit plan” — did not satisfy Gardner and, as it turned out, was incomplete since we later learned that she also receives Medicare benefits.

Worse than that, Sebelius was wrong when she told Gardner she could not go into the exchange because she has employer-sponsored coverage. “If I have affordable coverage in my workplace, I am not eligible to go into the marketplace, that’s in the law,” she said.

That’s not accurate. In fact, healthcare.gov makes clear that anyone can shop on the exchanges as long as they are legally living in the United States and not incarcerated.

However, switching to the exchanges wouldn’t make much financial sense for her.

The exchange was set up for individuals who don’t have insurance or cannot obtain it through their employers. But Sebelius is part of the roughly 56 percent of non-elderly Americans who had insurance last year through employers, according to the Kaiser Family Foundation. If she gave up her employer plan and purchased an exchange plan, she would not be eligible for government subsidies because of her high salary and she would most likely have to give up the employer contributions toward the cost of her health plan.

The federal government pays 72 percent of the weighted average or 75 percent of the total premium of its employees, whichever is less. That’s not unusual. As we have written before, employer contributions in the private sector vary, but the overall average employer contribution was 82 percent for single insurance plans and 71 percent for family plans in 2013, according to the latest employer survey from the Kaiser Family Foundation and the Health Research & Educational Trust.

Members of Congress — including Gardner — and their staffers are required by the new law to purchase insurance on the new exchanges. The Office of Personnel Management, as we have written before, has ruled that it will continue to provide the same level of employer contribution for those employees that it now does under the Federal Employees Health Benefits Program, which covers more than 8 million other federal employees, retirees and their families.

But it’s not clear if federal employees not required to purchase insurance on the exchange could do so and receive an employer contribution from the federal government. That’s not a question that OPM addressed in its ruling.

It wasn’t until the very end of the exchange with Gardner that Sebelius said it would be “illegal” for her to get insurance on the exchanges.

As Gardner was urging her to find some way to purchase insurance on the exchanges, Sebelius blurted out: “It’s illegal.” She gave no explanation. Shortly after, Gardner’s office issued a statement accusing of her lying.

Gardner, Oct. 30: Is she lying, or is she unsure about the very law she is in charge of administering? What is illegal about her enrolling in the exchange? If she is misinformed, and unaware of the fact that she is eligible to join, I urge her to visit healthcare.gov where it clearly shows she meets the three criteria listed.

His statement included a link to the healthcare.gov Web page that answered the question: “Am I eligible for coverage in the Marketplace?” The answer: Yes, if you are lawfully living in the United States and not in prison.

“Sebelius presumably fits both of these criteria,” the Washington Post wrote. Both CNN and the Washington Post reported that Sebelius was wrong and that she can get insurance from the exchange, citing healthcare.gov as the source.

But what Sebelius did not say — and which her department later explained — is that Sebelius has both Medicare and FEHB coverage. That is a game changer.

Jason Young, an HHS spokesman, said the secretary has Medicare Part A (for hospitalization) in addition to the federal employee plan.

Some have suggested that she can give up her Medicare coverage and purchase insurance on the exchanges, but Young said that’s complicated and costly. “If you renounce Medicare benefits you also have to renounce your Social Security benefits and pay anything back that has been paid to you,” he said, referring us to a court decision that was summarized by the law firm of Osofsky & Osofsky.

The full exchange between Sebelius and Gardner can be found from 3:02:38 to 3:04:19 of a C-SPAN videotape of the hearing. An excerpt of it is below:

Gardner, Oct. 30: Why aren’t you losing your insurance?

Sebelius: Pardon me?

Gardner: Why aren’t you losing your health insurance?

Sebelius: Because I’m part of the federal employees …

Gardner: Why aren’t you in the exchange? You’re in charge of this law, correct, why aren’t you in the exchange?

Sebelius: Because I’m part of the federal employee health benefit plan.

Gardner: Why aren’t you in the — why won’t you go into the exchange? You’re a part of this law. You’re literally in charge of this law. Should you be any different than all of the other Americans out there who are losing their health insurance today?

Sebelius: I’m part of the 95 percent with affordable available health coverage, as are most of your colleagues in–

Gardner: You’re part of a plan that most Americans aren’t—available to them. Why will you not agree …

Sebelius: I am not eligible for the exchange …

Gardner: I went into the exchange.

Sebelius: … because I have coverage in my employer’s plan …

Gardner: You can decide to drop your coverage of your employer. You have the choice to decide not to choose…

Sebelius: No, that is not true, sir.

Gardner: I chose not to go on the congressional …

Sebelius: Members of Congress are now part of the exchange thanks to an amendment that was added by Congress, but I’m not eligible.

Gardner: Madam Secretary, with all due respect …

Sebelius: If I have affordable coverage in my workplace, I am not eligible to go into the marketplace, that’s part of the law.

Gardner: With all due respect Madam Secretary, I would encourage you to be just like the American people and enter the exchange and agree to find a way do that, Madam Secretary …

Sebelius: It’s illegal.

— Eugene Kiely and Robert Farley