Idaho Can’t Ignore ObamaCare Completely — But It Can Pry Open These Loopholes

Last month, the Trump administration saved ObamaCare from destruction. It was a difficult decision — and the correct one.

Administration officials shot down a daring plan from Idaho Gov. C.L. “Butch” Otter that would have allowed Idaho insurers to ignore ObamaCare’s premium-inflating regulations.

Under the proposal, insurers would have been able to offer discounted coverage to healthy customers. Such discounts are currently prohibited by ObamaCare’s “community rating” mandate, which requires insurers to charge people the same premium regardless of health status. In effect, healthy customers subsidize sick ones by paying artificially high premiums.

Insurers would also have been permitted to sell inexpensive, bare-bones policies. These plans don’t comply with ObamaCare’s “essential health benefits” mandate, which requires all plans to cover ten broad categories of medical services, including substance abuse rehab and prescription drugs.

The Idaho plan would have drastically lowered premiums for many state residents who buy their own coverage. But it also would have set a dangerous precedent. ObamaCare is still the law of the land. States can’t nullify federal law. Executive branch officials must enforce existing statutes — even when they disagree with them.

It’s no mystery why Idaho officials are eager to circumvent the Affordable Care Act. The law’s rules and regulations have caused premiums to soar. Rates for individual plans on the state’s exchange increased an average of 24% in 2017. Average premiums spiked even more dramatically this year — 38%. One insurer, Regence Blue Shield of Idaho, raised rates by 51%.

To relieve consumers, Idaho’s Department of Insurance announced that it would allow insurers to sell plans that don’t meet ObamaCare’s requirements, as long as they also offered at least one ObamaCare-compliant policy. Blue Cross of Idaho was set to start selling such noncompliant policies, dubbed Freedom Blue plans.

Federal law prohibits such an arrangement. So the Department of Health and Human Services, led by newly appointed Secretary Alex Azar, had little choice but to block Idaho’s effort. In a letter to Gov. Otter, Centers for Medicare and Medicaid Services Administrator Seema Verma asserted that ObamaCare “remains the law and we have a duty to enforce and uphold the law.”

At the same time, she praised the governor’s “dedication to the people of Idaho and (his) efforts to address the damage caused by (ObamaCare).”

Fortunately, there are legal avenues for Idaho and other states to expand access to affordable coverage without compromising the rule of law. Consider the Trump administration’s recent proposal regarding short-term health plans.

ObamaCare’s mandates don’t apply to short-term plans, which people have traditionally used to fill gaps in coverage when they change jobs or move to another state. These plans offer limited benefits. And insurers can medically underwrite applicants. So healthy people can get a good deal. The plans typically cost hundreds of dollars less per month than ObamaCare-compliant ones.

Enrollment in short-term plans surged more than 150% from 2013 to 2015; consumers flocked to the cheaper plans instead of enrolling in ACA-compliant exchange plans.

To scuttle this alternative, the Obama administration issued a rule banning short-term plans that last longer than three months. But earlier this year, the Trump administration issued a proposed rule that would reverse the Obama-era regulation. Insurers would be permitted to sell short-term plans lasting up to a year. Americans could freely choose between less regulated, more affordable short-term plans and ObamaCare-compliant exchange plans.

Association health plans could offer another legal alternative to ObamaCare. In January, the Department of Labor proposed a rule to expand AHPs, which enable small businesses and self-employed individuals to join together to purchase health coverage. Similar to short-term plans, AHPs are exempt from many of ObamaCare’s costly mandates. The rule would effectively give small firms and individuals who previously couldn’t afford health insurance a more affordable option.

These are the sorts of workarounds Idaho officials should look for. By all indications, they’re already doing so. After Administrator Verma shot down their original plan, Idaho officials met with Trump administration officials and Sen. Jim Risch, R-Idaho, to find ways to dodge ObamaCare’s rules while staying within the letter of the law.

Gov. Otter and Idaho Insurance Department Director Dean Cameron recently encouraged CMS to allow short-term policies to be automatically renewable — a reform that would further facilitate their use as more conventional health plans.

Idaho’s leaders are right to make this pivot. Their plan to ignore ObamaCare’s most harmful provisions would have helped consumers but undermined the rule of law. It’s far better to work with the administration to find legitimate strategies for making coverage affordable.

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Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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