Note: this entry will likely be updated today as new information comes in.
President Obama is stating right now that the Executive branch of the federal government will fix the problems created by insurer cancellation of many individual health policies by forcing insurers to renew cancelled policies. It may be that state insurance commissioners will be able to veto this imposition within their own states.
A number of legal and economic issues are created by this proposal. I sketch them here.
1. Where does President Obama get the authority to issue such a regulation? The President can not rule by decree and it will be challenging to figure out what statute authorizes him to undo parts of the Affordable Care Act that would have prohibited insurers from selling such policies. Perhaps the President will argue that all he is doing is directing the Secretary of HHS and other executive officials not to prosecute or otherwise punish insurers for selling policies without Essential Health Benefits but only with respect to policies they had just recently cancelled? Or possibly he might expand the definition of what it means to be “grandfathered.” In any event, there is a separation of powers issue here worth thinking about.
But, if I am hearing the President correctly and reading news accounts properly, I am wondering who will have “standing” to challenge the ruling since no one appears to be forced to do anything. If I’m reading things incorrectly and insurers are indeed going to be forced to uncancel, then, unlike earlier expansionist views of executive authority such as delay of the employer mandate, there will definitely be institutions with “standing” — some insurer that does not want to renew — to challenge the ruling.
As one might expect, law professors are opining on the legality of the President acting here without congressional authority. Professor Eugene Kontorovich from Northwestern University Law School has published a quick piece on The Volokh Conspiracy, a leading conservative-libertarian blog, arguing that the President’s fix violates separation of powers. He also cites to the letter actually sent by CMS to State Insurance Commissioners explaining the President’s ruling.
2. From what I am now hearing, it appears that insurers will not be forced to reissue these policies. Nor will state insurance commissioners be forced to authorize sale of these policies. That should eliminate federalism issues or possibly due process issues. Otherwise there would have been a question as to whether forced insurance by the federal government — whether done by a legislature or through executive action — violates any independent protections of the Constitution? Assuming this is regulation of interstate commerce, nonetheless neither the executive nor the legislature can take property without just compensation and, on occasion, this provision has been interpreted to encompass regulations that effectively take property.
3. Assuming insurers accept the President’s invitation, doesn’t this create more problems for the Exchange? The hundreds of thousands or millions of people who are potentially being helped here are people who have recently been medically underwritten and are most likely healthy. If these people have the chance of being forced into a pool in which there is no medical underwriting and one in which there is, many will opt — even if there is no subsidy — into the underwritten pool, particularly if the Exchange policies offers a feature/price mix that they do not want. But the withdrawal of these people from the Exchange pools makes it ever more likely that an adverse selection death spiral could develop in the Exchange. The horse journalists and others should be beating now is not about breaches of promise — that’s been thoroughly discussed — but about how insurers who have agreed to write policies in the Exchange on one set of assumptions about the pool are going to react when those assumptions change.