Obamacare

Trump's Leaked Draft Proposal to Modify Obamacare May Be Illegal

A leaked rule would allow insurers to charge more to older customers, but it seems to violate the plain text of the statute.

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Gage-Skidmore / Foter

On Donald Trump's first day as president, he issued an executive order instructing federal agencies to provide relief from Obamacare to individuals and insurance companies. It was not immediately clear what specific steps the administration might take in response to the order, and White House officials declined to provide details.

We now have a hint about that the Trump administration might be considering, thanks to some recently leaked draft regulations: easing the regulatory burden on health insurance companies in order to let them charge more to older customers.

It's a response designed first and foremost to appease nervous insurance carriers at the expense of some of Obamacare's customers, and, like many of the Obama administration's moves to prop up the law, it is hard to justify legally. It also reveals what a precarious position the Trump administration is in, both legally and politically, when it comes to altering the implementation of the law.

Right now, Obamacare prohibits insurance companies from charging more than three times as much to seniors as to young adults. Older individuals tend to be more expensive to cover, so the practical effect is that insurers end up charging less to older enrollees and more to younger people than they would in the absence of the rule.

Leaked draft regulations would change the ratio from 3:1 to 3.49:1, allowing insurers to charge a little more to older individuals, and, presumably, offer somewhat lower prices to younger and healthier enrollees. The administration would defend the rule change by arguing that 3.49 "rounds down," according to The Huffington Post, which obtained a draft of the rules.

The fact that the administration is even considering a change like this is telling: Policy by too-clever gimmick—and that's what the 3.49 rating is—is almost always a bad sign, because it suggests there are no better options.

In any case, the justification may be too clever by half. The 3:1 ratio wasn't decided on by Obama administration regulators. It was written into the text of the law, which says that "the premium rate charged by a health insurance issuer for health insurance coverage offered in the individual or small group market…shall not vary by more than 3 to 1 for adults." (Emphasis added.) That 3.49 "rounds down" to 3 does not change the fact that it is still more than 3. Republicans in Congress could always change the statute, of course, but at this point there is no indication that they are considering doing so.

If the Trump administration did decide to pursue a regulation along the lines of the leaked rule, it would almost certainly spark legal opposition: The AARP, which lobbies for seniors, says it would consider filing a suit challenging the rule as a violation of the clear text of the law. On the basic question of whether the legislative text allows the change, they would appear to be right.

Beyond the legal complications, the draft rule suggests the political difficulties Trump will have tweaking the law.

Generally speaking, a more market-driven health care system would either not restrict insurer pricing based on age or would substantially expand the range (some GOP proposals modify the ratio to 5:1 or 6:1). And the move would make insurance a little cheaper for some young people. But mostly it is aimed at helping insurance companies, who are—with good reason—growing increasingly anxious about their participation in the law's health exchanges as congressional Republicans work towards repeal and the administration floats the possibility of regulatory changes. In the absence of a more systematic package of reforms, narrowly target changes like these, based on self-serving legal reasoning, are likely to be perceived as helping insurers more than to individuals—as providing relief primarily to one and not the other. Consumer advocates would almost certainly oppose the change.

And it may not be enough to completely satisfy insurance company jitters. "We still need certainty about short-term fixes in order to determine the extent of our participation in the individual market in 2018," Anthem CEO Joseph Swedish said last week, according to Politico. Unathorized leaks of draft regulations that are difficult to justify legally and virtually certain to be challenged in court do not exactly offer certainty about the coming regulatory environment.

Indeed, the entire effort highlights the general confusion within the Trump administration and amongst congressional Republicans about how exactly to deal with Obamacare: Should it be repealed? Replaced? Repaired? And if so, how?

Most Republicans say the goal is to do away with the law and move on to something better, but the proposed rule is designed to prop up the health law's system by providing an incentive for health insurers to continue doing business in the exchanges. It's like repairing the roof of a house while drawing up plans to have it demolished.

The confusion about how to respond to the law extends to Congress, where some Republicans appear to be open to the idea of authorizing funding payments to insurers that the Obama administration had been making illegally. In theory, this would come in the context of a multi-faceted repeal and replace plan, but given the current confusion about that effort, it is just as easy to imagine a system in which those payments become essentially permanent while the rest of the project falters.

The draft order, then, mostly serves as a reminder that the Trump administration will follow the Obama administration in using expansive executive authority to manage Obamacare, and to reinforce the general uncertainty about how the Trump administration will treat the law: Like Trump's initial executive action, it raises nearly as many questions as it answers.

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  1. WOW! Reason for the ACA.

    Yup, I’m done here

    1. “Yup, I’m done here”

      If only…

    2. But how will we stay warm without your boiling hot takes?

    3. Would you mind pointing out where Suderman is actually advocating for ObamaCare?

      Opposing a crappy way of stopping it is not the same as actually advocating for it.

      1. Not even a crappy way of stopping it, but a crappy way of trimming around the edges which will probably not stand up in court.

        1. Exactly. And some people think that pointing out this nonsense constitutes advocacy for ObamaCare.

          1. Some people are idiots.

          2. I remember when commenters here excoriated the GOP for what they saw as an intention to preserve the ACA with some minor tinkering. And I agreed with that sentiment: there’s no preserving parts of the ACA without preserving all of the worst parts: you have to have the mandate to make the preexisting coverage make sense, with a robust enough penalty to compel participation, and you have to have the community rating to ensure that neither seniors nor yutes opt out. Any reforms that don’t repeal the thickety mess would by necessity be hedge trimming.

            Well, here we have hedge trimming from the Trump administration. I hope it presages an effort to repeal, but I’ll give him plaudits for that when he deserves them.

            1. Basically, Trump will repeal the ACA just like Obama closed Gitmo. And just like before, the President’s supporters will find an inexhaustible supply of excuses for him.

              1. Agreed on the latter, but I’m holding out hope for the former. I think he realizes there’s blood in the water, and it’s mostly his. Between school choice, repealing ACA, and cutting tax rates, he has something for everyone but the most entrenched progressive footsoldiers.

                1. Wouldn’t blood in the water being his be bad? Meaning the progs are going to win. Sorry i am not sure what you mean here

                  1. I mean he has to move forward on the promises he’s made, or get dragged under. I guess I should have said he’s on thin ice. Point is, he needs to move. Which is why I’m not wholly unsatisfied that he’s doing something, however boneheaded.

            2. I dunno, in theory you could carve the mandate back to a minimal requirement for catastrophic coverage. And similarly carve the covered pre-existing conditions way back too. There’s really no bottom to how cheap you can make it. Of course every single one of these issues will be lead to mass hysteria (like the birth control stupidity) so in practice you’re probably right.

    4. I’m out too. I’ve always loved the comments here, but the staff is insufferable. Thanks for the memories.

    5. They also proposed forcing people to buy health insurance back in 2004. Look for the article “Make Health Insurance Mandatory Now!”

  2. SUDERMAN! [shakes Fist]

    1. Easy there. Suderman inherited this mess from the previous administration and it’s going to take time to get us out of the health insurance ditch.

  3. It’s like repairing the roof of a house while drawing up plans to have it demolished.

    If you’re stuck living in it, yeah, it makes some sense…

  4. im pretty sure it’s a draft for a reason.

  5. It’s just a joke you guys, geez.

  6. A leaked rule would allow insurers to charge more to older customers, but seems to violate the plain text of the statute.

    Considering that SCOTUS ignored the plain text of the statute in King v. Burwell and allowed the IRS to dish out subsidies to states that had refused to set up insurance exchanges, I don’t know why you bother, Sud.

    1. Don’t forget about the employer mandate delay.

      1. That too, but I don’t remember whether that was tested in court. Was it?

  7. but seems to violate the plain text of the statute.

    SCOTUS already ruled that the plain text of the statue is irrelevant.

    1. It’s bad enough we already have one set of knuckleheads reinterpreting plain text.

  8. Commenters are flipping out, but this article does not carry any of the telltale markers we’ve been excoriating reason over. A few weak points, but certainly not down to the depths of some of the dreck shovelled of late.

    Having read it, I found it more or less bland, and the main point that the draft proposal is contrary to the actual text of the law is not wrong or irrelevent.

    I don’t know if reason called out Obama over executive orders and regulations counter to the text of the same law, my memory for articles isn’t that good. If they did not, the response from me is “you should have been doing this all along”. If so, then it’s good to be consistant with regards to rule of law.

    1. UnCivilServant, see my point above. SCOTUS ignored the plain meaning and structure of the ACA when doing so would save it. SCOTUS justices merely pick and choose when the plain text matters depending on the outcome of doing so.

      1. And they were wrong to do so, making a ruling contrary to law.

        The fact that the government fails to follow the law is no reason to abandon advocacy for rule of law.

        1. I agree. My point is that you can’t count on the courts to fairly interpret statutes, and thus the rule of law, as practiced, is an illusion, and worrying about Trump’s action here seems pointless given the legal history of the ACA.

  9. See, it’s articles like these that I actually enjoy.

    It’s news-y, it’s not hyperbolic ranting against anyone, it’s not pushing some obvious narrative or agenda.

    Please do more like these, and less of the “OMG TRUMP OUTRAGE” or “OMG LEFTIST OUTRAGE” type of clickbait nonsense. Save those articles for the tribal websites.

  10. Considering that Roberts ruled in the last ACA case before SCOTUS that the executive can ignore the plain text of the law if the text inhibits the program from “working” as the executive wants it to, I am not sure what Suderman means by “illegal”.

  11. But mostly it is aimed at helping insurance companies, who are?with good reason?growing increasingly anxious about their participation in the law’s health exchanges as congressional Republicans work towards repeal and the administration floats the possibility of regulatory changes.

    This seems to be disingenuously trying to pin the responsibility for their anxiety on congressional Republicans. If I recall correctly, didn’t a number of insurers drop out of the exchanges before November? I don’t know, maybe the health insurance industry had a team of crack political analysts who knew that the government would be completely in Republican hands when Ms. Clinton was 10 points ahead in the polls.

    1. This seems to be disingenuously trying to pin the responsibility for their anxiety on congressional Republicans. If I recall correctly, didn’t a number of insurers drop out of the exchanges before November?

      Yes. Health insurers were dropping out of entire states in droves, leaving some states with a single provider, well before the election and the possibility of repeal sailing through Congress and onto a Republican president’s desk.

      I’m sure health insurers are anxious about current repeal efforts, and more for uncertainty than anything actually contained in draft bills. But the ACA has proven a health insurance disaster all along, as Suderman and many others had predicted.

      1. But the ACA has proven a health insurance disaster all along

        Which seems to me to be the central point. ACA is going to be “repealed” at some point because it will stop working. So why not repeal now?

        1. I agree. The reason why the insurers are dropping out is that the law forces them to sell plans that no one wants for the price they are offered. Repeal the law and the insurers will start offering plans that sell again.

          I don’t see why that is so hard to figure out.

          1. The subsidies are the problem. Repeal the law and there’s going to be a welter of upset between subsidies being cut off and the markets renormalizing.

            1. It will pass It is a price that is going to have to be paid eventually. Better sooner than later.

              1. That’s why the core problem, like always, is the public, or at least parts of the public. Our system of government, for better or worse, incentivizes elected officials to satisfy their constituents’ wishes, and, very unfortunately, a significant chunk of the electorate favors free or below-cost health insurance because it refuses to face economic reality.

              2. It will pass It is a price that is going to have to be paid eventually. Better sooner than later.

                Which is exactly why democratic institutions are unsuitable for producing sensible policies. “Sooner or later”, sure, but do you think an elected politician is going to prefer the sooner or the later? Everyone involved has a clear interest in kicking the can down the road as far as possible.

    2. That is unbelievably disingenuous. Insurers spent the all last year dropping out of the market and Suderman wrote about it. And now he claims that they are only doing it because the Republicans took over.

      Sudderman is worse than his wife. And she spent the better part of a year shilling for Obamacare and claiming that it would “bend the cost curve” and was “better than the current system”. McArdle is one of the dumbest people writing today. But Sudderman is worse. McArdle is just not very bright. Suderman is flat out dishonest.

  12. IF one is worried about leaks of drafts causing uncertainty, then why are they being covered?

    Oh yea clicks.

  13. The draft order, then, mostly serves as a reminder that the Trump administration will follow the Obama administration in using expansive executive authority to manage Obamacare, and to reinforce the general uncertainty about how the Trump administration will treat the law: Like Trump’s initial executive action, it raises nearly as many questions as it answers.

    No Peter. It serves as a reminder of just how insane and stupid this law is. The EO is an attempt to partially correct one of the more nasty and punitive parts of the law. I would think an effort to allow insurance companies to charge their customers more based on the actual cost of insuring them rather than some arbitrarily low number set by the government would at least be seen as an attempt to improve the law some, instead of an illegal act that just shows how smart Obama was.

  14. The fact that the left has ignored the plain text of the law does not excuse the right ignoring the plain text of the law. Increasing the ratio would be good in a vacuum but imagine the next Democratic ruler using identical logic to make it 2.51 instead.

    I, for once, am with Suderman here.

    Of course it needs to be repealed legislatively, but that doesn’t mean we can’t talk about the short-term executive side of it.

    1. There is no question in my mind they could do that. But so what?

    2. The fact that the left has ignored the plain text of the law does not excuse the right ignoring the plain text of the law. Increasing the ratio would be good in a vacuum but imagine the next Democratic ruler using identical logic to make it 2.51 instead.

      What makes you think the left wouldn’t keep doing what it’s been doing regardless of how principled the right tries to be?

      Since I value principles over team politics, I side with you and Suderman, too. However, you should realize that the Obama Administration did not need an excuse to assault the plain language of the ACA when it was politically convenient, and in no way was Obama punished for it. Therefore, why would a future Democratic administration need an excuse to do the same?

    3. Won’t work because of the parties to an enforcement action. If you’re charging 3.49X, you can say it’s 3X to the same precision the statute lists. If they try to make it 2.51X, you can make them show you what statute you’re violating if you charge 3.49X. Law in gen’l still favors allowing people to do things that aren’t specifically illegal.

  15. I have a ?

    Why are folks concerned about the mandate being repealed but keeping the pre-existing conditions? As the penalty is currently so low now that the mandate is sort of meaningless –> if you can’t afford the premiums it makes sense to just pay penalty and buy it if needed and then drop.

    I guess what i am getting at is if they repeal mandate but keep pre-existing it seems to me this won’t be much different than status quo as the penalty is toothless to begin with.

    1. Why are folks concerned about the mandate being repealed but keeping the pre-existing conditions? As the penalty is currently so low now that the mandate is sort of meaningless

      I agree; however, that reality never seems to enter the discussion vis-?-vis whether to ditch the mandate. Of course, the Obama Administration effectively repealed the mandate by keeping the penalty so low. The penalty isn’t harsh enough to prompt the “young and healthy” to purchase overpriced health insurance to offset the costs of subsidies to enrollees with preexisting conditions.

      1. And the judges won’t let them raise it to “harsh”, because then it becomes a penalty (which the Constitution doesn’t authorize) rather than a tax.

  16. And so it begins…

    It was pointed out many times last year (including by me) that Trump supporters are destined for big disappointment, because at some point they will become inconvenient for his latest deal, at which time he will throw them right under the bus.

    I just didn’t think it would happen this quickly.

    PS–Just to be clear, this is not a comment about whether this particular action is a Good Thing or a Bad Thing, just an observation that all those older rust belt Trumpers are about to have the veil lifted.

    1. How is this throwing them under the bus? And it is a draft

    2. I really don’t understand the need for hysterics here. It is not really a big change which doesnt look like it will even go anywhere

  17. Look, the entire ACA mess is broadly illegal, Unconstitutional, and (moreover) broken. That said, allowing it to crash, or flat repealing the damned thing, is a political non-starter. It’s like saying FDR should have let the depression burn itself out. Maybe in a perfect world, yes. But in the real world? So not going to happen.

    So, you draft executive orders, or tinker with legislation, that will allow you to shift things slowly in a ‘right’ direction.

    Obama still needs to be left buried in pigsh*t until this crap goes away.

    Head down.

  18. We now have a hint about that what the Trump administration might be considering , thanks to some recently leaked draft regulations… [and remove the space before the comma.]

    Republicans in Congress could always change the stature statute

    … narrowly target targeted changes like these…

    … are likely to be perceived as helping insurers more than to individuals…

    Do you even proofread?

  19. The AARP, which lobbies for leftist seniors,

    1. If you had to blame only one interest group for our government’s failure to cut entitlement spending, the AARP would be it.

      1. +$200TT in unfunded liabilities.

  20. The problem of looking an unreleased draft is what it doesn’t tell you. It is a document that’s being sent to a policy office to revise such things? More likely, is it a draft for a future EO (presidential transitions, and even late campaigns, write up dozens of EO drafts to their offices running for Day One) meant to be released alongside repeal legislation that changes the issue at hand? Suderman doesn’t stop to consider these Schoolhouse Rock-level questions about government operations.

    1. That is because he doesn’t know anything. The man spends his entire career writing about government and has no idea how government actually works. He is just a less honest version of his dimwitted wife.

  21. After reading the article, this EO is only a temporary measure to keep insurance companies from abandoning the ACA marketplace before a replacement plan is in place. Makes sense for the God-Emperor to want to keep things stabilized before Obamacare is replaced.

  22. Aargh, I want to line up the Reason editors and writers and give them a long, Three Stooges-style slap. Why aren’t they writing about libertarian solutions for healthcare. People don’t really care about insurance or the ACA, they care about getting care. Change the focus to that and talk, in detail, about how deregulation can lower costs. Get the Trump administration and Congress to listen to you on that! Don’t just whine about trivial shit like this. Look at the big picture and grasp the opportunity that Trump presents. Fuck, I could go through Reason’s archives, find dozens of articles on this, and reassemble them into a listicle. Why am I the only person who seems to grasp this??

    /yet-another-rant

    1. If you have a contract that says you can get your bills partly paid, you have “health care.” Never mind if your deductible is too high to make it worthwhile. Never mind if no doctor in your area will accept it. You have a piece of paper. Thus, health care.

      QED

    2. They have been covering the certificate-of-need (certificate of public convenience and need) issue. Also recently the nurse-practitioner/physician’s ass’t issue. They’re not federal matters, though, any more than school choice is.

  23. It says “3”, not “3.00”. Don’t significant digits count in law? 3.49 is effectively 3, to the precision specified by the statute.

  24. And this fulfills the promise of changes to make healthcare coverage less expensive how?

  25. From “Repeal” to “Repeal and Replace” to “Repair”
    Big Government reached its current massive proportions due to the ratchet effect. Every movement toward a larger, more powerful, and more intrusive government is permanent, because the ratchet only turns one way. That’s why Democrats were willing to commit political hara-kiri to ram ObamaCare through. They knew that once it was law, people would become dependent on it, and it would therefore be unrepealable, like all entitlement programs. Already Republicans are as good as admitting that despite having the power to do so, they have no intention of undoing the mischief:

    ObamaCare will end on the same day as Social Security and Medicare; that is, on the day that ever more unaffordable unfunded entitlements cause the entire system to collapse.
    http://moonbattery.com/?p=80752

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