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.
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.