Republicans in Congress failed to repeal Obamacare, but Republicans in Idaho are trying to do it themselves — law of the land be damned.
The state has rolled out the most audacious anti-Obamacare proposal yet, one that openly defies the fact that the Affordable Care Act is still in effect and in force. Idaho officials announced last month that they would allow insurance plans to be sold in the state that don’t comply with the health care law’s regulations. This means that plans can discriminate against people with preexisting medical conditions, by charging them higher premiums, and impose caps on the benefits their customers receive.
The ploy seems plainly illegal: Federal law, as amended by the ACA, flatly forbids health insurers from selling such plans. But Idaho is planning to permit them anyway — and it is not immediately clear who is going to stop it.
The Trump administration doesn’t appear eager to step in — and absent a federal action, it is not at all clear that litigation will actually be able to stop Idaho. The situation is akin to marijuana legalization during the Obama administration: When the federal government decides its resources are not best spent enforcing a federal law it does not really agree with, the courts are reluctant to force the feds to intervene.
If Idaho gets away with this anti-Obamacare scheme, the floodgates could open. Every Republican-led state would have a precedent for undermining the law’s core insurance protections. It could create a situation similar to Medicaid expansion after the Supreme Court ruled states could choose not to accept it. Republican-led states refused to take the expansion, leaving millions of people without health insurance, while Democratic states saw their uninsured rates drop to historic lows.
“The thing that worries me is every single red state that wants to do something more aggressive is gonna leap at the opportunity,” Nicholas Bagley, a law professor at the University of Michigan who is generally supportive of Obamacare, told me. “We’ll see a patchwork on the individual market every bit as profound as the disparity in Medicaid expansion.”
It is, in other words, a route to quasi-Obamacare repeal for Republican states. And the only way to stop it might be the Trump administration, which is openly hostile to the law.
At least one major health insurer wants to sell non-Obamacare plans
The most immediate question after Idaho announced its plan was whether any health insurer was actually going to take up the state’s offer. Because unless insurers bought in, the Idaho proposal would be an interesting theoretical exercise and nothing more.
Then last week, Blue Cross of Idaho submitted five “Freedom Blue” plans it wants to sell in the state starting in April that would not comply with the ACA’s regulations. The insurer will also continue to sell plans on Idaho’s Obamacare marketplace, for the record, as the state is requiring.
The average premium for these “freedom” plans would be 25 to 50 percent lower than the insurer’s Obamacare plans, according to this great breakdown from Katie Keith at Health Affairs. But there are some pretty big differences, Keith said, between ACA coverage and these new Idaho plans:
- Customers could be charged up to 50 percent higher premiums based on their or their family’s medical history; the ACA has famously prohibited insurers from charging different customers different rates based on their health status
- Customers could be denied benefits for preexisting conditions unless they maintained continuous coverage; again, the ACA forbids this
- Annual caps are back: These new “freedom” plans have annual limits of $1 million in benefits, which are outlawed under the ACA; there are also specific dollar caps for certain services, such as physical therapy
”These benefit, cost-sharing, and rating changes are designed to make Freedom Blue plans more attractive to healthier, younger individuals who can pass medical underwriting,” Keith wrote. “This will have the effect of leaving sicker, older individuals to the ACA-compliant market, resulting in higher premiums for those purchasing coverage through the marketplace.”
In other words: The Idaho proposal would create an alternative, pre-Obamacare market, which would likely hurt the ACA exchanges. Premiums would surely increase for ACA plans. Many people who receive federal subsidies — about 80 percent of Obamacare customers nationwide — would be protected from the increases by the tax credits, but costs for the federal government would increase.
Yet people who make too much money to qualify for federal subsides but who need comprehensive insurance because of their medical needs would be left with a choice: Either pay the rising Obamacare premiums or buy skimpier non-ACA coverage that might not cover the care they require.
“Creating a parallel insurance market that can cherry pick healthy people by offering plans that cost them less will raise premiums for ACA-compliant plans. That’s just math,” Larry Levitt, senior vice president at the Kaiser Family Foundation, told me. “Under this approach, the tradeoff for lower premiums for healthy middle-class people would be higher premiums for middle-class people with preexisting conditions.”
The Trump administration has a big decision to make about Idaho
Idaho’s Obamacare rebellion is a big test for the new HHS Secretary Alex Azar. For now, he isn’t showing his cards, demurring repeatedly in a briefing with reporters on Tuesday.
“I’m not in a position to rule on something I’ve seen a media report about. Let’s see where Idaho ends up,” Azar said. “I just don’t believe in premature opinions on complex topics. At the right time, I’m sure we would have views.”
The Trump administration itself, it should be noted, is also opening the door for more Americans to buy insurance that doesn’t comply with the ACA’s regulations, in a proposal to expand short-term insurance that was released Tuesday.
Azar added later, regarding the Blue Cross plans that have been filed: “We don’t even know what the state would purport to approve or authorize there.”
It was very similar to what he told the Senate Finance Committee the week before, when he was grilled by Democrats about the situation in Idaho.
Azar told the senators HHS had not actually received a waiver request from Idaho to permit the non-Obamacare plans. He did appear empathetic, at the least, about why Idaho was doing what it’s doing. From the Wall Street Journal:
Mr. Azar said the decision last month by the Idaho Department of Insurance to let insurers offer consumer plans that could charge higher premium rates to people with pre-existing conditions was a sign that too many people can’t afford coverage under the ACA.
“What we’re seeing here is a cry for help,” Mr. Azar said. Idaho officials have said they made the change to provide lower-cost options for consumers because of increases in ACA plan premiums.
Keith argued in Health Affairs, however, that Azar didn’t need a request from Idaho in order to step in. Federal law already appears to give him the authority to intervene.
”Given this authority, the widespread news coverage of Idaho’s approach, and a letter yesterday from patient advocates, Azar has more than enough grounds to initiate an investigation into whether (Idaho) is substantially enforcing the ACA,” she concluded. “If (Idaho) is not doing so, HHS is obligated under federal law and its own regulations to step in and do so.”
Absent any action from HHS before the plans go on the market, experts think a rash of Republican-led states might follow — though Azar told reporters he was not aware of any other state that had contacted HHS about an Idaho-like plan.
Idaho will have set the model for flouting Obamacare and undercutting some of its core elements — and faced no repercussions from a sympathetic administration.
“If HHS allows Idaho to go ahead with this, you can bet other conservative states will quickly follow in trying to flout the ACA’s rules,” Levitt said.
The weird legal standing of Idaho’s anti-Obamacare plan, explained
You might wonder: If Idaho’s plan obviously conflicts with the ACA, which is still federal law, how can they get away with it?
It’s a little complicated. But the gist is: Once the federal government decides it’s not going to enforce a federal law, the courts are typically reluctant to force its hand. The best most recent example might be the Obama administration’s decision to allow states to go forward with marijuana legalization, even though marijuana was still illegal under federal law.
Idaho is not technically doing anything illegal by permitting non-ACA insurance, Bagley told me, and the federal government can’t force states to enforce federal law. It is technically Blue Cross of Idaho that is violating federal law, specifically rules set under Obamacare that govern the plans health insurers can sell.
“Its claim cannot be what we’re doing is legal. The claim is we don’t think we’re gonna get caught,” Bagley said.
But unless HHS, the federal authority responsible for enforcing the ACA’s rules, steps in, there might not be another obvious recourse.
It could be difficult to find a person with the standing to sue the state or the insurer for violating their rights under federal law and even if you did find such a person, the courts are generally deferential to federal agencies about how they choose to use the resources at their disposal.
“I think counting on the courts is a big mistake,” Bagley said. “The federal government has limited resources and has to pick and choose when federal rules are violated. The courts usually won’t second-guess that determination.”
There is one notable difference between marijuana legalization and Idaho’s Obamacare revolt: Enforcing federal drug prohibitions would have cost substantial manpower and millions upon millions of federal dollars. Stopping Idaho’s health care plan should be as simple as HHS sending a letter to the health insurer.
But that is really a difference in name only — it wouldn’t necessarily have any bearing on whether a court would force HHS to enforce Obamacare and stop Idaho’s plan from going forward.
In Bagley’s reading then, the Trump administration is, ironically enough, the best defense for Obamacare against Idaho’s subversion of the law. HHS might use any number of rationales to stop the state: It doesn’t actually believe in what Idaho is doing, it has a constitutional obligation to uphold the law, or it wants to be a responsible steward of taxpayer dollars and Idaho’s plan would make ACA coverage more expensive for federal taxpayers.
But it is not at all clear that any of those rationales would actually compel the Trump administration to intervene in the Idaho case. HHS has certainly taken plenty of steps on its own to undercut the ACA, even though Obamacare remains the law of the land. The constitutional obligation sounds nice but doesn’t necessarily have much bearing on how the federal agencies will actually act.
The best bet might be the third — responsible stewardship of taxpayer dollars, a very conservative notion — but the White House has already taken steps, like cutting off key payments to health insurers that led to premium hikes and more costly federal subsidies, that increased Obamacare’s cost to the taxpayer.
HHS and Azar might still decide it’s in their best interest to stop Idaho’s plan from really taking effect. But the state’s open flouting of Obamacare represents perhaps the most potent threat to the health care law since Republicans in Congress failed to repeal it last year.
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