A New York nonprofit improperly diverted $25 million meant to help establish three Obamacare health insurance co-ops to a wholly owned for-profit subsidiary, a congressional oversight committee said Wednesday.
The Freelancers Union, which received $340 million in federal loans to set up co-ops in New York, New Jersey and Oregon, gave some of that cash to a for-profit entity called Independent Worker Services.
The accusation appeared in a congressional report made public Wednesday by the House Committee on Oversight and Government Reform, chaired by outspoken Obamacare critic Darrell Issa, a California Republican.
"The shortcomings of Obamacare co-ops demonstrate" the Department of Health and Human Services' "mismanagement of the co-op loan awarding process as well as serious deficiencies in the Administration's healthcare reform efforts as a whole," the report said.
The report was the focal point of an acrimonious hearing on Capitol Hill Wednesday, in which two of the key Democrats on the committee walked out in protest, saying they did not get the report until an hour before testimony began. "I am here protesting this report that was dumped on us," Rep. Matt Cartwright of Pennsylvania said before leaving.
The report referenced documents the committee obtained showing that the Freelancers Union "sought to further the group’s ‘power in markets’ and ‘power in politics’ through the CO-OP program. Freelancers Union, by transferring co-op funding through one of its subsidiaries, received approximately $25 million of taxpayer funds,” the report said.
Also: “Emails between Freelancers Union officials discuss the intention to ‘use returns from the CO-OPs to advocate for our members in states where they are served now and served in the future. Example: We will push to get colonoscopy legislation passed in New Jersey.' "
Since federal regulations barred co-op funds from going to for-profit enterprises, officials from Freelancers Union successfully lobbied HHS and the Obama White House for an exception.
The Freelancers Union officials met and communicated repeatedly with HHS officials, as well as at least 30 times with senior White House presidential aides in seeking the exception, according to the report.
Sara Horowitz, the founder and sponsor of the Freelancers Union and founder and sponsor of both Health Republic and IWS, told the oversight committee Wednesday that the $25 million that went to Independent Worker Services funded support services to get all three states' co-ops launched.
"I really want to be able to explain it to you, but it's complicated," Horowitz told the committee Wednesday.
"IWS' job — as was put in our application to begin with — was to be able to help to launch, setting up their IT systems, their back-end operations, helping them to select their vendors. And for that IWS was paid $25 million in the last two years.
"That's how the three co-ops were able to launch on time and on budget," she said.
IWS provides administrative services to Freelancers members. It shares office space and staff with the Freelancers Union, according to previous congressional testimony.
Horowitz is a former colleague of President Obama's from his days as an Illinois state senator. They served together on the board of a left-leaning New York think tank, Demos, early in their careers.
Many of the Freelancers' White House meetings were with Elizabeth Fowler, a special assistant to Obama for health care and economic policy. Fowler was considered the White House “point person” on the Obamacare co-op program.
Horowitz said Wednesday that the Freelancers Union "was well qualified — perhaps the most qualified organization — to serve as a sponsor" of the New York co-op.
The committee's report also noted that the committee had requested enrollment figures for all three of the Health Republic-linked co-ops, but had received no responses.