The Northern Mariana Islands are an American territory in the Pacific Ocean with 15 islands and 77,000 residents. Their population is roughly equal to that of Sante Fe, N.M. And, right now, the territory is at the center of the oddest health reform disaster you've never heard of.
Because of a quirk in the Affordable Care Act's drafting, the Northern Mariana Islands and the four other American territories are subject to some parts of the law but not others. This has messed up the individual market in the Northern Mariana Islands so badly that the one plan selling policies there told the territory's top insurance commissioner it would not sell new plans for 2014.
In other words: Beginning Jan. 1, regulators expect it will be literally impossible for an individual to buy a new policy in the Northern Mariana Islands, and difficult in other territories.
"In the 50 states and D.C., everybody is crying about the Affordable Care Act not working," says Sixto Igisomar, the regulator. "You multiple those things exponentially for us."
The problem, in its simplest form, is this: While the Affordable Care Act requires health insurers in the territories to accept all shoppers no matter how sick, it does not mandate that all territorial residents buy plans nor does it provide subsidies to make coverage more affordable--as it does in the 50 states and the District of Columbia.
This is, to put it mildly, a really bad way to run an insurance market. The whole idea of the subsidies and the mandate was to encourage enrollment among the healthier, younger people necessary to support an insurance market that also works for the sick. Without them, experts expect only sick people will enroll--and premiums will skyrocket. It's like building a house with a roof but no walls.
"HHS and the government itself describe health care reform as a three-legged stool where you have the mandate, the subsidies and the market reforms," says John McDonald, director of the Virgin Islands' division of banking and insurance. "Well, what they've basically done is left us with a one-legged stool."
The problems stem from how Congress drafted the Affordable Care Act, including the territories in some provisions but not others. New insurance regulations--like the requirement to sell to all shoppers, cover a larger suite of benefits, and limits on premiums--were included as amendments to the Public Health Service Act. American territories do fall under that law, and must comply with its requirements.
The individual mandate and insurance subsides, however, are not amendments to the PHS Act. They're just part of the new health care law, which defines states differently, as "each of the 50 states and the District of Columbia." As such, territories are also barred from using the federal health exchange but did have the opportunity to build their own marketplaces.
Back in 2010 when the health law passed, the territories were generally enthusiastic about the big changes it would bring to the insurance market. Most of them have uninsured rates much higher than the states (the notable exception being Puerto Rico for reasons explained here). The governor of the Virgin Islands sent a letter to the federal government asking it to extend the health law's benefits "to the maximum extent permitted by law."
It's hard to pinpoint when, exactly, they became aware of the potential problems of implementing the insurance reforms without a mandate or subsidies. Either way, they are now very concerned--and there's little hope of a quick solution.
The territorial insurance regulators, on their own and in coordination with the National Association of Insurance Commissioners, have asked the Obama administration for a one-year delay in the requirement that insurers accept all shoppers.
"We urge you...to provide the territories with the flexibility that they need to determine whether and how the market reforms should be applied," an October 16 letter from the NAIC to HHS Secretary Kathleen Sebelius says.
But Health and Human Services has said previously that it doesn't have the regulatory authority to delay a health law provision--only Congress can make that type of an alteration. In a letter this summer, the administration also pointed to the territories' previously eager support for the health-care law which they saw as an about-face. As HHS describes it, territories initially embraced the new regulations only to later reject them.
"HHS, at the request of and with full support from territories, confirmed the Affordable Care Act's market reform provisions that are incorporated into the PHS Act, including the guaranteed availability provision, are applicable to the territories," Center for Consumer Information and Insurance Oversight director Gary Cohen wrote in a July letter to territorial governors.
"However meritorious your request might be," Cohen continues, "HHS is not authorized to choose which provisions...might apply to the territories."
(Territorial officials are quick to point out here that the administration has allowed other delays, to provisions like the employer mandate, when they proved too burdensome to implement. "They keep telling us they can't change the law, but they moved the mandates," says Art Ilagan, Guam's top insurance regulator.)
The administration has offered technical assistance to alleviate the problem alongside potential policy work-arounds. One solution Health and Human Services has suggested is having the territories pass their own individual mandates, just as Massachusetts did back in 2006. But the regulators say that won't work either, because they don't have enough money to subsidize the purchase of insurance coverage for their citizens.
Guam, for example, estimates it would need $75 million annually to pay out insurance subsidies under the health-care law. And while the health-care law does include some federal funds for could be used for that purpose, it's much less -- $25 million meant to last for five years, from 2014 through 2019.
“As written by Congress, the law does not allow for tax credits to be extended to the territories," HHS spokeswoman Joanne Peters said in an e-mail. "We continue to work closely with the territories to provide technical assistance and guidance as they implement the law.”
Meanwhile, the territory is already running up against its territorial debt ceiling, and doesn't have that additional $50 million.
Igisomar thinks the very best solution is actually expanding the health-care law, not delaying it. He wants Congress to re-open the Affordable Care Act and include the territories in the individual mandate and subsidy provisions. He also realizes that, for a small territory, a path through congressional gridlock is pretty much non-existent.
"We have a Washington delegate, but I don't know that our one Washington delegate can make a difference," he says. "The idea is to raise awareness so that every other American citizen from a territory can fully understand the impact."