Is another illegal Obamacare fix in the works?

February 18

The Washington Examiner reported Monday that insurance industry insiders anticipate another Obamacare “fix” as the Administration struggles to implement the unwieldy and stubbornly unpopular health care reform law.

Industry insiders told the Washington Examiner a plan to extend the Affordable Care Act’s “risk corridors” are under discussion, but that administration officials have not made a final decision.

The risk corridor program was written into the 2,700-page health care bill to help the insurance companies offset losses if they enroll too few healthy customers and sign up too many people with high health care costs.

Megan McArdle of Bloomberg has more here.

According to the Examiner report, the Administration is considering this option because it could be necessary to offset the costs of another administrative fix to the law.  Under Section 1342 of the PPACA, the Secretary of Health and Human Services is instructed to “establish and administer a program of risk corridors for calendar years 2014, 2015, and 2016 under which a qualified health plan offered in the individual or small group market shall participate in a payment adjustment system based on the ratio of the allowable costs of the plan to the plan’s aggregate premiums.” (Emphasis added.)  This is because risk corridors were meant to be a temporary accommodation for insurers, providing short-term protection while newly reformed insurance markets stabilize.

Whether or not extending risk corridors past 2016 is a good idea, I cannot see how it is authorized under the PPACA.  Nowhere that I can find does the law provide for, or otherwise authorize, risk corridors past 2016, nor have I found language that could serve as a generic authorization for this initiative.  Were that not bad enough, the Administration also lacks the authority to authorize insurance companies to renew noncompliant policies (a point which some of the Adminsitration’s defenders concede).

While the PPACA does provide for a “hardship exemption” from the individual mandate, this exemption only applies to individuals — those subject to the individual mandate — and not to insurance companies.  So the Administration can excuse individuals for not obtaining qualifying health insurance coverage, but it has no authority to allow insurers to issue policies that do not provide for minimum coverage.

The Examiner report is part of a disturbing pattern in PPACA implementation. Time and again it is discovered that the PPACA, as written, is unlikely to work as intended.  And time and again the response is to change the law’s requirements through administrative fiat.  That this pattern continues says quite a bit about the PPACA — and quite a bit about how the current administration views the scope of Executive Branch authority.

Jonathan H. Adler teaches courses in constitutional, administrative, and environmental law at the Case Western University School of Law, where he is the inaugural Johan Verheij Memorial Professor of Law and Director of the Center for Business Law and Regulation.
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Jonathan H. Adler | February 18