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The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

The Unfolding ‘Keep Your Plan’ Imbroglio



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Many people are trying to make sense of President Obama’s new plan to address the disruption caused by the recent wave of insurance policy cancellations, and the Republican plan to do the same. 

Carol E. Lee and Louise Radnofsky of the Wall Street Journal offer a breakdown of the president’s announcement, and they offer some of the political context. Kim Strassel, a conservative critic of the Obama administration, argues that the president and his allies made the announcement on Thursday to prevent congressional Democrats from backing Michigan Republican Fred Upton’s “Keep Your Plan Act” on Friday:

The stage was set for dozens of Democrats to join with the GOP for passage—potentially creating a veto-proof majority, and putting enormous pressure on Senate Majority Leader Harry Reid to follow suit.

The White House couldn’t risk such a bipartisan rebuke. Moreover, the Upton bill—while it lacks those GOP joy words of “delay” or “repeal”—poses a threat, since it would allow insurers to continue providing non-ObamaCare policies to any American who wants one. Democratic Sen. Mary Landrieu’s version of the bill would in fact (unconstitutionally) order insurers to offer the plans in perpetuity. Both bills undermine the law’s central goal of forcing healthy people into costly ObamaCare exchange plans that subsidize the sick.

In Strassel’s view, the president’s administrative fix “was likely also groundwork to shift the blame for canceled policies to insurers and state regulators,” as state regulators will have to approve insurance policies that violate new coverage mandates established under the Affordable Care Act and insurers will have to decide to issue them despite the legal risks that would entail.

Sarah Kliff offers an explainer focused on President Obama’s plan.

Jonathan H. Adler, a professor at the Case Western Reserve University School of Law and a leading Obamacare critic, warns that the president’s decision creates serious risks for insurers. The Obama administration maintains that it has wide latitude to enforce provisions of the law or not. Yet this does not make the renewal of non-compliant policies legal. And even if state insurance commissioners choose to approve the renewal of plans illegal under federal law, despite the difficulties this will entail (as submitting rates and plan specifications takes time), insurers will still be making a gamble:

[E]ven if state commissioners approve the plans, they will still be illegal under federal law. Given this fact, why would any insurance company agree to renew such a plan? It’s nice that regulators may forbear enforcing the relevant regulatory requirements, but this is not the only source of potential legal jeopardy. So, for instance, what happens when there’s a legal dispute under one of these policies? Say, for instance, an insurance company denies payment for something that is not covered under the policy but that would have been covered under the PPACA and the insured sues? Would an insurance company really want to have to defend this decision in court? After all, this would place the insurance company in the position of seeking judicial enforcement of an illegal insurance policy. If there’s an answer to this, I haven’t seen it. It’s almost as if the Administration has not thought this through. As Sarah Kliff reports, this supposed “fix” creates a “big mess.”

Yesterday, Ezra Klein contrasted the various proposals to address insurance policy cancellations, including the president’s administrative fix and Upton’s “Keep Your Plan Act.” He suggests that the president’s administrative fix risks alienating insurers:

The insurance industry is furious. They’ve been working with the White House to get HealthCare.Gov up and running and they’ve been devoting countless man hours to dealing with the problems and they’ve been taking the heat from their customers over canceled plans, and now the Obama administration wants to make them into a scapegoat.

“This doesn’t change anything other than force insurers to be the political flack jackets for the administration,” an insurance industry insider told Evan McMorris-Santoro. “So now, when we don’t offer these policies, the White House can say it’s the insurers doing this and not being flexible.”

The question here is whether it’s a good idea for the White House to enrage insurers whose cooperation it needs to fix HealthCare.Gov.

Yet he also sees political risks for Republicans in the Upton bill:

The bill gives insurers the option of renewing their cancelled plans — but, crucially, it doesn’t require them to do so. Few insurers want to renew those plans, as they don’t expect them to be profitable in a post-Obamacare world. So Upton’s bill doesn’t mean people can keep their current health insurance, but it means they can begin (wrongly) blaming their health insurer rather than the Obama administration for the cancellation of that insurance.

Meanwhile, Upton’s bill has a secondary provision allowing insurers to offer new plans in 2014 that don’t comply with the Affordable Care Act’s consumer protections. So if an insurer wants to continue turning people away for being sick, they can go right ahead. If they want to offer shoddy coverage that’ll evaporate the moment a health crisis strikes, that’s their prerogative. The result is that Upton guts the law’s extremely popular insurance regulations.

One important difference between the administrative fix and the Upton bill, however, is that the latter offers a firmer legal foundation for insurers to offer plans that don’t comply with the ACA’s mandates.

Earler today, the Upton bill passed in the House by 261 to 157, with 39 Democrats joining Republicans. Robert Pear and Ashley Parker report on the potential implications:

The House bill says that if an insurer was providing coverage in the individual market on Jan. 1 of this year, it “may continue” to offer such coverage for sale next year in the market outside the new insurance exchanges.

People who choose to buy or renew these policies in 2014 would be deemed to be in compliance with the requirement to have insurance, so they would not be subject to tax penalties for violating the individual mandate.

Insurance executives say that the premiums in the new federal and state marketplaces were based on the assumption that younger and generally healthy people who had been enrolled in cheaper plans would move into the new marketplaces. Their presence would help keep prices lower for everyone.

If those healthier people stick with their current plans, then the new marketplaces will be filled with older, sicker people, and premiums could rise.

James Capretta offers a defense of the Upton bill, arguing first that while it will be difficult for state insurance regulators and insurers to reverse policy cancellations, it won’t be impossible; and second, that though the Upton bill “is not a panacea,” it will help preserve “a viable insurance market outside of Obamacare’s rules and suffocating structure”:

Millions of Americans would flock to a revitalized insurance marketplace that offered lower premium products with better coverage. The end result would be one more step toward fully reversing the catastrophic mistake of Obamacare.

Capretta doesn’t address the concern that the Upton plan will undermine the risk pools on the Obamacare exchanges because he sees this as a virtue of the law — that it represents a step towards full repeal. 



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