I’ve been trying to understand the legality of the president’s administrative “fix.” One thing that’s clear: While President Obama gave a speech saying that his administration will permit insurers to renew plans that don’t comply with Obamacare’s requirements, it was just a speech. It didn’t change the law. That means that insurance companies who sell plans that are still illegal under the law could be sued in courts and won’t get any legal protection.
Over at the Volokh Conspiracy, Jonathan Adler, a law professor at Case Western University, explains:
Does this make the renewal of non-compliant policies legal? No. The legal requirement remains on the books so the relevant health insurance plans remain illegal under federal law. The President’s decision does not change relevant state laws either. So insurers will still need to obtain approval from state insurance commissioners. This typically requires submitting rates and plan specifications for approval. This can take some time, and is disruptive because most insurance companies have already set their offerings for the next year. It’s no wonder that some insurance commissioners have already indicated they have no plans to approve non-compliant plans.
Yet even 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.”
A lawyer friend of mine I consulted sent me the following explanation:
Here are the two operative phrases from the CMS letter yesterday:
Plans “will not be considered to be out of compliance with the market reforms.” CMS is just saying they will not consider them out of compliance. However, THEY WILL BE OUT OF COMPLIANCE. And none of the market reforms themselves are changed by the President’s speech or the CMS letter.
“State agencies responsible for enforcing the specified market reforms are encouraged to adopt the same transitional policy with respect to this coverage.” Wonderful, a suggestion from CMS to state agencies, who are the ones who actually have to allow insurance plans to be sold. Again, only a suggestion, no legal effect.
So here you go: Insurance companies that will agree to continue the old policies will do it at their own risk. In other words, in the name of political expediency, the administration threw the insurance companies under the bus (where they they at least have the company of the millions of Americans who lost their plans because of Obamacare’s requirements). As expected, they’re very upset by this development. Yuval remains us, however, that insurance companies have mostly themselves to blame for the situation they find themselves in now:
The response of the insurers, in the form of a statement put out by their industry group Thursday afternoon, was harsher than anything they have had to say about Obamacare since its inception, and it seems pretty clear that their basic disposition toward the administration and the law will now be changing for the worse. The insurers have no one to blame but themselves—they made a deal with Obamacare’s champions early on, knowing it was a gamble. But of course, they won’t be blaming themselves, and by turning them into scapegoats at this point the White House puts its effort to salvage something of Obamacare’s launch in even greater peril.
In addition, it is unlikely to work. Cato’s Michael Cannon has a good post on this point:
Set aside the president’s disregard for the U.S. Constitution, the separation of powers, and the rule of law generally. Here’s how his fix alters – where it leaves – his once-categorical “if you like your health plan, you can keep your health plan” promise:
- If your insurer hasn’t already cancelled your plan prior to October 1, 2013, and
- If you had coverage in effect on October 1, 2013, and
- If your insurer wants to invest in re-issuing your already-cancelled plan for just one more year, and
- If your state’s insurance commissioner wants to let your insurer re-issue that plan, and
- If your insurer and your commissioner can get your old plan re-approved by January 1, and
- If your insurer informs you how lousy your old plan was and how awesome ObamaCare plans are, even though they may charge you more for less coverage, and
- If your insurance commissioner does not mind approving products that are clearly illegal under federal law, and
- If you and your insurer don’t mind engaging in an economic transaction that is clearly illegal under federal law, and
- If you trust me when I promise not to prosecute any of you for your clear violations of federal law,
- Then you can keep your plan, for one more year.
Does that seem like a fix? It certainly doesn’t seem likely to work.
What a mess.