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Obama Provides More Political Insurance



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Today the administration announced yet another (longer and broader) delay in the implementation of the Affordable Care Act, extending the political patch for President Obama’s broken “if you like your plan, you can keep it” promise until after the president has left office. According to senior HHS officials, states will have the discretion to allow insurance issuers to offer non-ACA compliant plans (that is, illegal plans) through the 2016 plan year in the individual and small-group markets.

Cancellations in the former market created a firestorm this past fall and cancellations in the latter (likely to be an order of magnitude larger) were set to be announced just before the November elections. Taking no chances for 2014 and 2016, the administration simply handed this hot potato to state insurance commissioners (who must approve the policies) and insurance companies (who have to agree to keep issuing them). 

Along with this delay, HHS is altering the risk corridor (“insurer bailout”) calculations for exchange plans in states allowing the non-compliant plans and the Treasury is issuing the final rule simplifying employer and insurer reporting requirements for the employer mandate.

In sum, the administration released three major changes – two from HHS and one from the Treasury department – (1) extending “consumer choice” through 2016 plan year; (2) altering the risk corridors within states that choose to allow non-compliant plans to be renewed until October 1, 2016, and (3) issuing the final employer-mandate reporting rule.

The politics of making canceled plans somebody else’s responsibility is straightforward. Unfortunately, it means that healthier people will stay in their original, affordable plans while sicker people will opt for Obamacare exchange coverage, guaranteed issue, and richer benefits.

Enter the risk corridors. The administration is simply promising to shovel more money, albeit not enough to cover the total losses, toward the plans that get stuck with the expensive Obamacare signups. In addition, the rule finalized the proposal to reduce the starting point of another form of bailout for insurers, the subsidized reinsurance the law provides.

Sadly, this Rube Goldberg patch leaves Americans and insures on dangerous policy and legal footing:

  1.  As the American Action Forum pointed out after the last “sorry, we’ll try to get your canceled plan back” announcement, the non-compliant plans are still illegal. That means a policy holder could sue if an insurer did not cover an “essential benefit” under Obamacare. This opens insurers up to some potentially hefty legal liability. HHS is delaying these provisions written clearly in the legislation under their authority to set enforcement priorities. The ACA prohibition on non-compliant plans is still in effect, but not being enforced by HHS. However, Do the courts still need to enforce it? If an ACA benefit is mandated by law, but the plan is pardoned by a state insurance commissioner, in theory the enrollee could still sue when that benefit is not covered.
  2. The non-compliant plans do not satisfy the legal requirement for the individual mandate. Will the IRS ding holders of these plans with the tax penalty?
  3. Are states that previously decided against allowing non-compliant plans going to change their stance? What happens to the old plans that the states forced to be canceled?
  4. If plans renew before October 1, 2016, will there be a period of time prior to open enrollment in 2017 during which those individuals cannot get coverage?
  5. Are these plans required to keep premium prices and benefits constant in order to continue? What changes are allowed, if any?

CMS officials claim that the changes are not for political reasons, but instead represent how a law should be implemented. Methinks they doth protest too much. A more honest administration would simply employ the Iverson defense. To paraphrase: “This is the year of action and we’re in here talking about the law. Not an election, not an election, not an election that we go out there and die for. The law. It’s silly.”

— Douglas Holtz-Eakin is president of the American Action Forum.



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