Sebelius’ Powers Under Health Law Raise Concerns

Published November 12, 2010

In a recent decision, Secretary of Health and Human Services Kathleen Sebelius announced she would grant waivers to more than thirty companies and firms from several aspects of President Obama’s health care law. The waivers came in response to public statements from several of the companies indicating they would be forced to drop their health care plans unless regulators waived key new requirements within the health overhaul.

The decision has prompted criticisms that Sebelius wields unprecedented powers under the law. Avik Roy, a Heartland Institute health policy expert and an equity research analyst at Monness, Crespi, Hardt & Co., says one of the most underreported aspects of the new health care law is the tremendous amount of power it places in the hands of the HHS Secretary.

“When you read the law, you see that in nearly every section, the word ‘secretary’ is mentioned. The secretary decides or ‘provides her discretion.’ The law will give her enormous power to make decisions about how companies will structure their business,” Roy said.

Could Stifle Criticism

In addition to holding authority over an annual budget of more than one trillion dollars, Sebelius has the power to exempt companies from various requirements of the health care overhaul, says Roy.

“There are hundreds of examples of similar provisions in the law. If there is no repeal, there will still be plenty to fight over. HHS currently is running a budget of a trillion dollars, and it now controls a major portion of our economy. So I see the secretary position getting even more politicized,” said Roy.

Roy says the power to grant these waivers provides many opportunities for corruption and could prevent businesses from publicly criticizing the law because of the possibility of reprisals.

More to Come

This is just the beginning of the changes to come, says Devon Herrick, a senior fellow with the National Center for Policy Analysis in Dallas, Texas.  

“The [health care overhaul law] has 1,075 instances in the bill of ‘the Secretary shall’ and other forms of delegation of power. Besides the waivers, we’ve just seen an example where the Secretary changed her interpretation of the law when it became evident that insurers would no longer sell child-only policies,” said Herrick.

Herrick says the ability to “exercise discretion” in whether HHS will enforce the minimum medical loss ratios, such as the department’s decision to grant McDonald’s a waiver from certain regulations, gives bureaucrats free rein to engage in abusive government practices.

“Had it not received the waiver, McDonald’s would have dropped its health plan. When the employer mandate takes effect in 2014, McDonald’s will drop its health plan and merely pay the $2,000 penalty,” Herrick said. “There is a tradeoff between labor and capital. If labor becomes more expensive, firms will substitute capital.”

Pushing out Private Plans

Herrick notes Sebelius’ waivers are merely a way of “disguising the consequences” of Obama’s law, which will necessarily drive firms that hire a disproportionate number of moderate-income workers to drop their health plans and push their workers into state health care exchanges.

“Despite the president’s promises that you can keep your plan if you like it, I suspect the architects of the PPACA knew few plans would retain grandfathered status a decade after passage,” said Herrick.

Kenneth Artz ([email protected]) writes from Dallas, Texas.