CWS 3.0: November 20, 2013

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ACA Changes: A Commentary

By George Reardon

Last week, President Obama announced his intention to forego enforcement of the Affordable Care Act provisions and regulations that make many existing health insurance plans very difficult or impossible to keep. This is his reaction to the massive wave of insurance company cancellations of individual policies that do not conform to the law’s strict requirements.

There are several serious problems with this plan:

  • It is not a real solution to the coverage losses caused by the law. The president lacks the constitutional power to change the law that Congress passed or to make new laws of his own design. Regulations can be changed only after a complicated process that is mandated by law. Even the president and the Congress together lack the power to force insurance companies to insure anyone. Legal challenges are sure to arise and put the effects of this plan in doubt well into the future.
  • The president’s work-around strategy is that “enforcement discretion” can accomplish what the law and the constitution forbid. In other words, the reinstated policies would still be illegal, but he would personally promise not to prosecute or penalize insurance companies or employers that offer them. Any companies that rely on that theory would risk that the administration might choose to selectively enforce the law against them in the future.
  • The cancelled policies can’t instantly be reinstated. They are subject to state insurance regulation and filing processes, which take time and which rely on state regulators going along with a plan that is contrary to written federal law.
  • Even if insurance companies are merely allowed, and not compelled, to reinstate the cancelled policies, there is no way to force all of the cancelled people to reenroll, and insurance companies could be unwilling to reenroll only some of the people that they previously insured. Voluntary reenrollment by people’s individual decisions would produce anti-selection in some kinds of plans, meaning that the sickest formerly insured people would reenroll but many healthy formerly insured people would not. That would change the risk level of the reinstated plans and require premium increases that can’t be accurately assessed in advance.
  • Reinstating cancelled plans would divert a major anticipated source of enrollment in the exchanges, thus aggravating the exchanges’ enrollment and anti-selection problems.
  • The president’s plan would compel insurance companies to highlight the alleged “defects” in their own products and promote enrollment in the exchanges, which are their competition. In addition to being beyond the president’s powers, this self-flagellation mandate is not likely to persuade insurance companies to voluntarily participate in this bailout plan.

However, if implemented, the plan might temporarily resuscitate the so-called “mini-med” plans that would otherwise become illegal at the end of 2013. Such plans tend to be richer than the “skinny” plans now being considered by staffing firms to replace them under ACA. Commentators also anticipate that a wave of employer plan terminations will occur as the postponed employer mandate approaches at the end of 2014, so the administration or the Congress may take action to avoid that effect. Such action may affect the choices that staffing firms will otherwise face over the next year.

George Reardon is an attorney with the law firm Littler Mendelson. He can be reached at greardon@littler.com. 

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