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Guam and the four other American territories got some good news this week: they will no longer be held hostage by a byzantine set of Obamacare rules and regulations.
In letters sent July 16, the Obama administration notified territorial regulators that their residents would be largely exempted from health law requirements. The decision was meant to settle a months' long dispute between insurance regulators and the White House over how Obamacare effects American territories, which had made a mess of their insurance markets.
Territories were stuck in a bizarre Obamacare no man's land
Whatever gripes some states had about Obamacare, their complaints couldn't hold a candle to those coming from American territories.
A weird quirk of the health care law made American territories like Guam and American Samoa subject to certain requirements but not others in way that was terrible for the insurance marketplace.
Health plans in the territories had to accept all customers, for example, but didn't have any individual mandate or insurance subsidies. to lure the healthy people into signing up. This is pretty much a recipe for a death spiral: when the insurance market is open to everyone, but there are no incentives to sign up, its usually only the sick people who buy coverage.
"HHS and the government itself describe health care reform as a three-legged stool where you have the mandate, the subsidies and the market reforms," John McDonald, director of the Virgin Islands' division of banking and insurance, told me when I wrote about the issue last December. "Well, what they've basically done is left us with a one-legged stool."
These regulations had screwed up territorial insurance markets so badly that health insurance plans bolted; it's currently impossible to purchase an individual market insurance plan in the Northern Marinas Islands.
The new decision: Obamacare mostly doesn't apply to territories
Six months into Obamacare's insurance expansion, it appears that the territories' big problems might be coming to an end: the Obama administration now says it will exempt them from a whole host of Obamacare requirements, perhaps most importantly the requirement that insurers offer coverage to all shoppers.
"After a careful review of this situation and the relevant statutory language, HHS has determined that [some] new provisions do not apply to the territories," Centers for Medicare and Medicaid Services administrator Marilyn Tavenner wrote in a July 16 letters to territorial insurance regulators.
In other words: instead of getting partial-Obamacare, which really screwed up the territorial insurance markets, the territories are essentially getting no Obamacare.
The Obama administration now plans to issue regulations that say insurers selling coverage in the territories don't have to accept all customers, as those selling in American states do. Territorial insurance plans will no longer have to cover the essential benefits package, nor will they be subject to the "80/20 rule," which requires health plans to spend at least 80 percent of premiums on medical costs.
This is a change from the position that the Obama administration took in 2013, when it told the territories that it did not have the legal authority to pick and choose which Obamacare requirements would apply.
"However meritorious your request might be," Gary Cohen, who was then the director of the Center for Medicare and Medicaid Services, wrote in a July 2013 letter, "HHS is not authorized to choose which provisions...might apply to the territories."
This isn't the ideal situation that some territorial officials had advocated for. One regulator from the Northern Marinas Island had hoped that the White House would decide to extend the individual mandate and insurance subsidies to the territories, rather than just scrapping the whole project. Territorial residents pretty much won't have the insurance expansion that's happened in the states.
Still, this change is near certainly an improvement over the current Obamacare situation in the territories, bringing some relief to what is arguably Obamacare's oddest problem.
