Obamacare’s remarkable run of legal luck may be running out.
Earlier this summer, the Obama administration said that it would appeal a federal judge’s March ruling that found some of the health care law’s payments to insurers unconstitutional.
That announcement came on the heels of another loss for Obamacare in court. A few days prior, a three-judge panel of the D.C. Circuit Court of Appeals invalidated an administration rule generally prohibiting the sale of “fixed indemnity” coverage, which provides patients a fixed reimbursement, regardless of the actual cost of care.
Both decisions seriously threaten Obamacare’s viability.
In the first case, House of Representatives v. Burwell, the plaintiffs – House Republicans – alleged that the administration violated the constitutional principle of separation of powers.
The administration spent billions of dollars on “cost-sharing reduction” subsidies designed to offset some of the costs insurers had to eat lowering deductibles, cost-sharing and coinsurance for exchange-plan enrollees with incomes below 2.5 times the federal poverty level.
Problem was, Congress never appropriated funds for this program. In fact, the House asserted that it had exercised its constitutional power of the purse by refusing to fund it.
Judge Rosemary Collyer of the U.S. District Court for the District of Columbia agreed. If lawmakers chose not to approve such subsidies, she wrote, “that is Congress’ prerogative; the court cannot override it.”
Judge Collyer stayed her ruling – meaning that the subsidies can continue – pending a final judgment from the U.S. Supreme Court. If the high court sides with her, Obamacare’s finances could be in big trouble.
Insurers in the exchanges are legally obligated to offer discounted coverage to low-income Americans, regardless of whether or not the government makes good on its pledge to come through with the subsidies.
That’s an expensive undertaking. More than half of exchange shoppers – roughly 5 million people – got the discount.
Absent reimbursement, insurers would be on the hook for $9 billion in the next year alone – and a staggering $170 billion over the next decade.
That leaves insurers with two choices – drop out of the health exchanges altogether or significantly hike premiums.
Either way, consumers lose.
The number of insurance choices on the exchanges has already dwindled. In 2013, 395 insurers participated in exchanges nationwide. Last year, 287 did – a decline of 27 percent. It looks like that number will decrease further in 2017.
Insurers who continue to offer exchange plans will have to raise premiums to make up for the disappearance of those federal subsidies. The Urban Institute predicts that, absent subsidies, annual premiums for mid-level silver plans would increase by $1,040 per person, on average.
The administration is trying to avoid such hikes with decrees like its ban on less-costly fixed-indemnity coverage. In some cases, such plans only cover specific diseases like cancer. In others, they offer fixed-dollar coverage of doctor’s appointments or hospital stays.
A 1996 law exempts fixed-indemnity coverage from federal standards. That includes Obamacare’s expensive essential health benefit mandates.
Consequently, it’s much cheaper than exchange coverage. Some 4 million people have fixed-indemnity plans without companion comprehensive coverage.
The Obama administration was not happy about the prospect of so many people opting out of the exchanges – and taking the premiums they would have paid into the exchange pool with them. So in 2014, it ordered a ban of fixed-indemnity coverage unless a patient also carried comprehensive coverage. The goal was to try to force people back into the exchanges.
Not so fast, said the judiciary. In the case of Central United Life Insurance Co. v. Burwell, the court unanimously upheld the 1996 exemption, chastising the administration for having “clearly misread” the law.
The ruling could do more than simply make fixed-indemnity coverage an option again. As Washington and Lee University law professor Timothy Jost has noted, “If a health insurer could simply label a product as fixed indemnity coverage and thereby escape all ACA requirements, the insurance reforms could be eviscerated.”
The Obama administration has routinely fudged, tweaked and downright ignored the law in hopes of getting Obamacare to work. The judiciary has finally realized what’s happening – and may be on the cusp of halting all this extralegal behavior.
If these two decisions stand, the end of Obamacare itself may be near, too.