The House last Friday passed the Keep Your Plan Act that doesn’t guarantee that people can keep their plans. The President threatened to veto the bill in any case, asking Americans instead to trust him this time when he says that you can keep your plan if you like it, though that’s really not true. People who simply want to renew coverage that they’ve paid for without help from the government or their employers deserve better. There is an obvious solution to their problem. Congress and the President should call a truce and solve it.
They’ve solved it once before – in 1996. That was the year that a GOP-controlled Congress enacted, and President Clinton signed, the Health Insurance Portability and Accountability Act (HIPAA). As with most laws, HIPAA was a hodgepodge of good and bad provisions. One of the good ones addressed the problem millions of today’s consumers are having with renewing their coverage. Section 211 of the law created a new section 2742 of the Public Health Service Act that stated:
SEC. 2742. GUARANTEED RENEWABILITY OF INDIVIDUAL HEALTH INSURANCE COVERAGE.
(a) IN GENERAL.—Except as provided in this section, a health insurance issuer that provides individual health insurance coverage to an individual shall renew or continue in force such coverage at the option of the individual.
The provision was simple and straightforward. Renewability of existing health coverage was guaranteed. Health insurers “shall renew or continue in force [health insurance] coverage at the option of the individual.” (A related provision of the law extended the same protection to small businesses.) So long as you’ve paid your premiums and not engaged in fraud, your insurer must give you the option to renew your coverage. You can decline the option, but you can't be denied the choice.
Then came Obamacare. Section 1251 of that measure made the first breach in this wall of consumer protection. The section is ironically entitled, “Preservation of Right To Maintain Existing Coverage.” It would more accurately have been called, “Curtailment of Right To Maintain Existing Coverage.” It said that if you had a policy in effect as of March 2010 (when the President signed Obamacare into law), you could renew it. Suddenly, the right to keep coverage you liked had a shelf life. If you bought insurance for the first time or switched policies after March 2010, the government now had the power to take it away.
This power didn’t sate the appetites of government regulators. So they conjured the notion that a plan – even one that had been purchased before Obamacare’s enactment -- could lose its “grandfathered” status, something that the law neither contemplated nor authorized. People in “non-grandfathered” plans forfeited their right to keep coverage they liked. Instead of requiring insurers to renew coverage, they made such renewals illegal, transforming what had been a consumer protection into a consumer peril.
The decision to nullify the right to renew your coverage was deliberately taken. Customers who bought coverage on their own and faithfully paid their premiums are the very ones that insurers and regulators want to herd into the government’s exchanges. Letting them renew existing policies keeps them out of the exchanges. So even as the President was assuring people that they could keep their coverage, his Administration was ensuring that they could not.
For more than three years, the federal government, state insurance regulators and the insurers themselves prepared for the inevitable issuance of cancellation notices. Consumers weren't in on the joke. They were told that Obamacare wouldn't affect them, that they could keep their insurance plan if they liked it. Their cancellation notices didn't arrive until quite recently. A political eruption ensued.
The White House didn’t anticipate the ferocity of the fallout, especially its effect on the Congressional wing of his party, leading the President to follow an unaccustomed trajectory from denial, to claiming to having delivered people from "substandard" insurance, to blaming insurance companies for the cancellations, to apologizing and, most recently, to misleading people into believing that he’s solved their problem. He hasn’t.
What he did was to direct HHS to write a letter to state insurance commissioners, telling them that the federal government will not, for the next year at least, enforce federal requirements that compelled insurers to issue cancellation notices. It is still illegal for insurers to renew people’s policies, but the federal government promises not to enforce the law for the time being. His announcement protects no one’s coverage; nor does it require any insurer to renew anyone’s policy; nor does it insulate insurers against state enforcement actions or private lawsuits. And while the letter encourages state regulators that helped supervise the process of cancellation notices to stand down, it does not require them to do so.
The President, having spilled the beer, now says that it’s OK by him if insurers violate federal law and try to unspill it – so long as state regulators play along.
The association representing those state regulators reacted harshly to the announcement, suggesting that they may be disinclined to follow the President in his latest pivot. The National Association of Insurance Commissioners (NAIC) pronounced itself:
“Concerned by the President’s announcement today that the federal government would use its ‘enforcement discretion’ to delay enforcement of [Obamacare’s] market reforms in 2014 for plans that are currently in effect. … It is unclear how, as a practical matter, the changes proposed today by the President can be put into effect.”
Translation: You made us do this. How, exactly, do you expect us to undo it?
The insurance industry was more diplomatic. If consumers are Obamacare’s helpless children, insurers are its battered spouse. They are in a codependent relationship with the Administration. The President requires their cooperation for his law to work, but can’t resist giving them the occasional verbal lashing. They chafe at the President’s abuse but need his corporate welfare to turn a profit on policies that they sell in the bureaucratic labyrinths officially known as “exchanges,” but that the President calls “marketplaces.”
In their response to the President’s announcement, they whined about “changing the rules after health plans have already met the requirements of the law” and threatened that “premiums will increase in the marketplace and there will be fewer choices for consumers.” Then they got to the punchline: “Additional steps must be taken to stabilize the marketplace and mitigate the adverse impact on consumers.”
“Additional steps” indeed. What the insurance lobby signaled was that if some of these policies are renewed, then the health insurance exchanges will lose many reliable and generally healthy customers. That means that insurers in the exchanges will face the prospect of incurring substantial losses, forcing them next year to seek big increases in premiums or pull out of the exchanges. So they asked the Administration to take “additional steps” – i.e., more corporate welfare.
They needn’t have worried. The last paragraph of the HHS letter to insurance commissioners promises more goodies to insurers that have agreed to work with the government:
“Though this transitional policy was not anticipated by health insurance issuers when setting rates for 2014, the risk corridor program should help ameliorate unanticipated changes in premium revenue. We intend to explore ways to modify the risk corridor program final rules to provide additional assistance.”
As I’ve written elsewhere, the “risk corridor program” is one of Obamacare's corporate welfare provisions, designed to induce insurers to sell through the exchanges. These provisions deserve repeal, and the government’s promise to insurance companies to “modify the risk corridor program” to "ameliorate unanticipated changes in premium revenue“ and "provide [insurers] additional assistance” reinforces my case. Presidential spokesman Jay Carney later confirmed that HHS would "mitigate" insurers' costs through the risk corridors.
Congress seems in no more of a hurry than the President to make meaningful changes to the law. One can’t blame Republicans. It was only a few weeks ago that they were being bludgeoned for their decision to try to force the President to “defund” the health care law in exchange for ten weeks of government funding. What the President calls his “fumbled” rollout has completely changed the narrative. The law’s problems have at least temporarily damaged his popularity and credibility and fueled anxiety among Congressional Democrats.
Why should Republicans solve the problems that are causing the President such vexation? Why not advance a bill that overachieves on the politics and underachieves on the policy? Republicans did just that, putting to a vote a measure that, like this week’s Presidential announcement, relies on the tendermercies of state regulators and insurers to protect the rights of consumers. Without the cooperation of both, you can’t renew your coverage.
The bill’s odd contradictions seem to result from a political calculation that it will never become law. It appears to have been drafted with that in mind. Its primary purpose wasn’t to reinstate a consumer protection but to exploit and exacerbate Democratic angina about Obamacare’s political risks.
It did all of that. House Democratic leaders were concerned that many of their followers would vote in favor of the bill. The President’s hurried change in position was meant to stem the bleeding. When that didn’t work, he issued a veto threat. With Democratic unrest still not subsiding, Congressional leaders scrambled to come up with an alternative that they could frame as a complement to the President’s action. Vote for our alternative, they said, then vote against the Republican bill. But despite the furious lobbying campaign by the White House and their Congressional leaders, 39 Democrats – about 1 in 5 who showed up for the vote – bucked their party and sided with Republicans.
So Republicans find themselves in an enviable political position. They badly split the Democratic caucus and forced the President through a hellacious week in which he gave millions of people hope that they could keep their coverage. When that hope again disappoints, Republicans can say it’s because the Senate and the President prevented their bill from becoming law.
There is nothing especially remarkable about politicians acting politically. But when anxiety about millions of people losing coverage reaches this level, it might be possible to do more: reinstate consumers’ longstanding right to renew their health coverage.
A law that applied HIPAA’s guaranteed renewability requirement to existing plans won’t be popular with the political class. The President won’t like it, since it will keep millions of paying customers out of the exchanges. Insurers won’t like it since it will require them to renew coverage they thought they weren't allowed to renew and cut into the profits of plans sold through those exchanges. Many state regulators won’t like it, since it will roll back 3-1/2 years of painstaking effort to strip people of their coverage and because, like almost everything else about the health care law, it will be difficult to administer. Republicans won’t like it because it will “fix” one of the myriad problems of a law they detest.
The only people who will like it are those who matter most: people whose policies are being cancelled because of a government edict. Surely they deserve more consideration. If the White House and Congressional leaders are unwilling to step up, then perhaps there is some residue of bipartisanship that would inspire a group of Senators of both parties to unite around a legislative solution that stands a genuine chance of enactment.
Government creates many messes that it can’t clean up. This isn’t one of them. Congress and the President should work together to clean up this mess.