by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.
Blue Cross of Idaho Announces That It Will Offer “Freedom Blue Plans,” Which are Non-ACA-Compliant Plans
- Interestingly, I believe that Blue Cross of Idaho can do whatever it wants here. BUT, I also believe that by offering non-ACA-compliant plans, Blue Cross of Idaho will be exposing itself to some hefty financial penalties. It will all come down to whether the State of Idaho will impose penalties on Blue Cross, or whether HHS will step-in and impose penalties because the State of Idaho is not doing so. And, if HHS chooses not to “step in,” the question is whether a court of law can compel HHS to impose penalties on Blue Cross.
- Analysis: It is important to understand that the consequence for selling non-ACA-compliant plans is a $100 per day/per violation penalty. To me, the statute is clear that this $100 per day/per violation penalty is supposed to be enforced by the State. And to me, the statute is also clear that if a State fails to enforce the ACA’s insurance market reforms, HHS is supposed to “step-in-the-shoes” of the State and enforce these requirements on the State’s behalf. This is why for over the past 4 years we have NEVER seen an insurance carrier selling non-ACA-compliant plans. The carriers, and the States, and HHS all understood what the statute is saying: That if a carrier sold non-ACA-compliant plans, the carrier would be hit with penalties, which NO carrier ever wanted to incur. Soooo, NO carrier did it. BUT, I say all of that without seeing the legal opinions that Blue Cross of Idaho (and Idaho’s Insurance Department) received, arguing that the Freedom Plans can indeed be sold free from penalties. Based on the limited information that I have, it appears that the legal argument in favor of selling these plans is that so long as Blue Cross of Idaho sells at least 1 ACA-compliant plan (alongside the Freedom Plans) – and so long as the State of Idaho is enforcing the ACA’s market reforms as it relates this ACA-compliant plan – Idaho is substantially enforcing the ACA’s requirements (as required by the statute), and therefore, everything is peachy. I have not had the opportunity to dig into the law to agree or disagree with this legal argument, but in my opinion, so long as the non-ACA-compliant plans are being sold, penalties should be imposed on a carrier selling these non-compliant plans, regardless of whether the State is enforcing the ACA requirements with respect to other plans. Another argument Blue Cross of Idaho seems to be relying on is this: The previous Administration allowed States to offer non-ACA-compliant plans in the form of the “transitional policies.” You have heard me talk at length about these “transitional policies” the past few years (for example, see my attached update from June 20, 2016, the 1st post, 2nd paragraph). In short, the previous Administration announced that States could allow its insurance carriers to offer health plans that did NOT meet the ACA’s insurance market reforms. Based on my count, about 40 States allowed their carriers to sell these “transitional policies.” Importantly, the previous Administration extended the ability for these “transitional policies” to be sold all the way through the end of the 2017 plan year. And, the Trump Administration extended these “transitional policies” for a 3rd time, until the end of the 2018 plan year (see the attached update from Feb. 20, 2017, where I discussed this in my “HHS Update”). This sounds like a pretty good argument, right? The Freedom Plans can avail themselves of the previous Administration’s guidance on “transitional policies,” and therefore, Blue Cross of Idaho can sell these non-ACA-compliant plans penalty-free, so long as the State of Idaho permits it. BUT, based on my read of the original announcement that allowed these “transitional policies” to remain in force, the announcement applies to plans that were in existence prior to Jan. 1, 2014 (see the original guidance on the “transitional policies” here). As a result, I do NOT believe that the ability to sell non-ACA-compliant plans as “transitional policies” extends to NEW plans offered in the marketplace. And based on this, I feel that the above stated legal argument that Blue Cross of Idaho (and/or the Idaho Insurance Department) may hang their hat on falls short. Having said all of that, query whether the Trump Administration can issue NEW guidance expanding on the previous Administration’s decision to allow non-ACA-compliant plans (i.e., the “transitional policies”) to continue to be offered?? This modified guidance could say that in addition to the non-ACA-compliant plans that were in existence prior to Jan. 1, 2014, NEW non-ACA-compliant plans can similarly be sold, provided a State allows them to be sold. While this would send shock-waves through the marketplace, I am not quite sure the Trump White House is prohibited from issuing this type of guidance. Why? Because it ultimately comes down to whether HHS is going to impose penalties on the sale of non-ACA-compliant plans. Importantly, the reason why the “transitional policies” could be sold is because the Obama HHS decided NOT to impose penalties on the sale of these non-ACA-compliant plans. Did the Obama HHS have the authority to decide NOT to impose penalties? Some would say YES, and others would say NO. But what is clear is that the Obama White House essentially told HHS NOT to impose penalties on these particular plans, and the Obama HHS obliged by NEVER imposing ANY penalties. Why can’t the Trump White House do the same exact thing?? That is, why can’t the current White House tell the Trump HHS NOT to impose penalties on NEW non-ACA-compliant plans being sold in a particular State? The previous Administration set the precedent. At the end of the day, it will all come down to a legal challenge to determine what is right and what is wrong. After all, NO ONE ever filed a lawsuit against the previous Administration’s decision to allow “transitional policies” to be sold, so the precedent set by the previous Administration was never challenged. You can bet-your-bottom-dollar that ACA supporters and consumer advocates will file legal challenges if the Trump White House ever decides to allow non-ACA-compliant plans like the Freedom Plans to be offered. These legal challenges will likely say that HHS is compelled to impose penalties on those carriers selling the non-ACA-compliant plans. Which raises another legal question: Can a court of law can compel a Federal Department to impose penalties if the Federal Department chooses to remain idle? I am just as curious as you are on how this may all play out. Interesting stuff!!
The Decision to Sell Non-ACA-Compliant Plans May Not Be All That Bad for the Individual Market “Risk Pool”
- Although Congressional Democrats and ACA supporters have been going NUTS over what is going on in Idaho – to me – they are failing to recognize the positive consequences that may flow from the sale of the Freedom Blue Plans.
- Analysis: When the Idaho Insurance Commissioner announced that the State would allow BOTH ACA-compliant and the non-ACA-compliant plans to be sold, the Commissioner explained that these plans would be a part of the SAME “risk pool.” This is extremely important because it means that the health risks of the people enrolled in the ACA-compliant plans will be pooled together with the health risks of the people enrolled in the non-ACA-compliant plans. Which means, NO market segmentation. And – to me – this also means that older and/or less healthy people who enroll in ACA-compliant plans will NOT be disadvantaged from a cost perspective because the healthy risks will continue to subsidize these less healthy risks (thus keeping premiums in-check for the less healthy population). Here is another way to think about this: The non-ACA-compliant plans will by definition NOT be eligible for the premium subsidies. Which means, these non-ACA-compliant plans will be attractive to people who are NOT eligible for a premium subsidy (i.e., those people who have incomes above 400% of FPL, and who are required to pay the full-cost of their health coverage). There is a presumption that these un-subsidized consumers are on the healthy side. And there is a presumption that, in many cases, these healthy risks may be entering the risk pool for the first time. For example, there is evidence that a good chunk of healthy people are “sitting on the side-lines” and NOT enrolling in health coverage (e.g., IRS data tells us that about 18 million Americans paid a penalty tax or claimed an exemption from the tax in 2015, and HHS data shows that about 45% of this population are under the age of 35). So, in the case of Idaho, if these healthy, un-subsidized Idahoans enroll in Freedom Blue Plans – thus entering Idaho’s individual market risk pool (in some cases, for the first time) – this action will be VERY good for older, sicker Idahoans who are currently enrolled in ACA-compliant plans. Here is yet another way to think about this: As stated, the non-ACA-compliant plans will by definition NOT be eligible for the premium subsidies. Which means those Idahoans who are low-income – and therefore subsidy-eligible – WILL be attracted to the ACA-compliant plans for financial reasons (because for these subsidy-eligible Idahoans, it would NOT be in their best economic interest to enroll in a Freedom Blue Plan, because in most if not all cases, enrolling in an ACA-compliant plan will be CHEAPER for them). This all boils down to this: Older, sicker Idahoans will have access to adequate consumer protections through a subsidized ACA-compliant plan. And, their less healthy risks will be pooled together with those healthy Idahoans who may purchase the Freedom Blue Plans. In the end, the risk pool should remain strong, and these older, sicker Idahoans will have the protections they need (while un-subsidized – and often healthy Idahoans – now have a “choice” of purchasing a lower costing plan). Last comment: I am still stuck on this issue that – in the State of Idaho – BOTH ACA-compliant plans and non-ACA-compliant plans will be a part of the SAME risk pool (which is the right policy, in my opinion). This is because back during the ACA “repeal-replace” exercise, Sen. Cruz (R-TX) offered an amendment that would have essentially done the SAME thing (see the last attached update, 2nd post). Yet, the insurance carriers went NUTS over this proposal, arguing that they could NOT include in the same risk pool consumers covered under plans that covered different benefits. They said actuarially, we CANNOT make it work. Well, it appears that Blue Cross of Idaho’s actuaries – and the Idaho Insurance Department – believe they CAN make it work. Should the insurance industry apologize to Sen. Cruz, or is Idaho an anomaly?