Health Insurers Worried That Obamacare Might Have to Be Implemented as Written
Imagine you're a health insurer participating in Obamacare's exchanges. There are some things you don't like: The back end of the federal exchange, which is supposed to handle payments to insurers, still isn't finished. There are some things you'd like to see changed: Insurers currently aren't allowed to offer plans below a certain actuarial value—the average amount of medical expenses covered for people in the plan—although there are currently proposals to change this.
But even still, it's not a bad arrangement: Americans are generally required to buy the product you sell, they are heavily subsidized by the federal government, and if your expenses for exchange-based plans come in more than a bit higher than expected, the federal government will cover a significant percentage of your overage.
All in all, you've got a fairly generous setup. But you probably have some worries. For instance, what about those lawsuits contending that, because the text of Obamacare only allows subsidies in state-established exchanges, only state-established exchanges should be allowed to disburse subsidies? Imagine what would happen if those crazy legal challenges were actually successful. That might be a problem for insurers, given that the majority of exchanges were established by the federal government, not states.
Now, many of the health law's supporters have argued that the challenge is an extended legal joke—an error in wording, not a serious legal challenge. Only an anti-Obamacare cynic, a text-obsessed nihilist, could think that when Congress wrote and passed legislation specifying that subsidies would be available in state-established exchanges that Congress actually meant this literally. Or, well, Jonathan Gruber, who helped draft the federal health law and the Massachusetts health reform it was based on. But that's neither here nor there.
If you're an insurer, however, you might not be so sure. You see this Gruber fellow saying, all the way back in 2012, that "if you're a state and you don't set up an exchange, that means your citizens don't get their tax credits." (He's since changed his mind, and says he previously misspoke on multiple occasions.) And you see a couple of court decisions that seem to buy into the odd notion that the plain, unambiguous text of the law is the clearest expression of congressional intent. You notice that, even when a court disagrees with the challengers, it agrees that they kind of have a point, as the Fourth Circuit did when it admitted that "a literal reading of the statute undoubtedly accords more closely with their position."
Sure, one of the decisions in favor of the challengers has now gone to a full court review, which is expected to be more favorable to the administration. But overall, the whole situation looks kind of dicey.
And so, since you're an insurer, you'd probably want, well, insurance against the prospect that these oddball legal literalists, who think the law should be implemented in the explicit way that the text of the law states, and not some impressionistic way that better fits the administration's purposes, might actually win.
As CNBC notes, that's just what insurers sought and eventually got from the Obama administration in the latest round of health exchange contracts:
These insurers will sell you some Obamacare—at least as long as the government is footing the bill for most of their customers.
Insurers doing business on HealthCare.gov will be allowed to terminate their health plans if there's a halt on federal tax credits that help most Obamacare customers buy the coverage, according to new language for 2015 contracts.…The language in the contracts, without saying so overtly, recognizes that there is a chance that those challenges could succeed.
In other words, if you're an insurer, you might be worried. And you might have good reason to be.