Yes, it’s happened again, twice in a matter of days. The Obama administration has made major changes to Obamacare or the Affordable Care Act (ACA) without Congressional approval. Based on a Galen Institute list of administrative changes to ACA, the first change occurred on April 19, 2011 when a Medicare Advantage “patch” was created to forestall cuts in benefits, which would have occurred just before the 2012 elections. It’s now been 1,058 days since the Obama administration unilaterally has changed the healthcare reform law without any consequences from Congress. The “Imperial Presidency” appears to be alive and well.
Here’s the background. The botched Healthcare.gov roll-out and several malfunctioning state-run exchanges prevented untold numbers of people signing up for ObamaCare and thus getting access to the premium tax credits and cost-sharing subsidies based on income. By law, the subsidies are only available to individuals or families with household incomes between 100 – 400 percent of the federal poverty level and only through a state-run exchange.* Many people gave up trying to enroll before the end of the year while others decided to purchase health insurance outside the exchanges, undoubtedly knowing doing so would prevent them getting access to the subsidies but wanted the coverage immediately.
But the Centers for Medicare and Medicaid Services (CMS) came to the rescue and issued guidance late Thursday, February 27, 2014, to the state exchanges that it would provide premium tax credits and cost-sharing reductions on a retroactive basis not only for individuals that currently do not have health insurance but even to individuals that have Obamacare compliant insurance outside of the exchange if they have now been found to be eligible for the subsidies. Here is what CMS said in its background statement:
This guidance is being provided to Marketplaces that, due to technical issues in establishing automated eligibility and enrollment functionality, have had difficulty in providing timely eligibility determinations to applicants and enrolling qualified individuals in Qualified Health Plans (QHPs) through the Marketplace during the initial open enrollment period for the 2014 coverage year. Such a circumstance may be considered an exceptional circumstance for individuals who were unable to enroll in a QHP through the Marketplace due to these issues. In this guidance, we discuss the availability of advance payments of the premium tax credit (APTC) and advance payments of cost-sharing reductions (CSRs) on a retroactive basis to an issuer once the Marketplace has provided a qualified individual with an appropriate eligibility determination and has determined that the individual is eligible for such assistance and the individual has enrolled in a QHP through the Marketplace. We also clarify the attendant responsibilities of the QHP issuer in this circumstance.
Viola! CMS will allow people who are currently not enrolled in health insurance coverage since January 1, 2014 but have since received notification they are qualified to receive a taxpayer-funded subsidy will be able to get it retroactively when they do enroll. Going one step further, CMS declares “if an individual in the exceptional circumstance described above is enrolled in QHP coverage offered outside of the Marketplace, when he or she receives a determination of eligibility for coverage through the Marketplace, the Marketplace may deem the individual to have been enrolled in the QHP through the Marketplace retroactive to the date on which the individual first enrolled in the QHP outside of the Marketplace. In that case, the individual will be treated for all purposes as having been enrolled through the Marketplace since the initial enrollment date.”
This is clearly a violation of the law. Here is what the IRS announced on February 25, just three days before CMS’s announcement:
The Premium Tax Credit
IRS Health Care Tax Tip 2014-03, February 25, 2014
The premium tax credit can help make purchasing health insurance coverage more affordable for people with moderate incomes. To be eligible for the credit, you generally need to satisfy three rules.
First, you need to get your health insurance coverage through the Health Insurance Marketplace [emphasis added.] The open enrollment period to purchase health insurance coverage for 2014 through the Health Insurance Marketplace runs from October 1, 2013 through March 31, 2014.
Second, you need to have household income between one and four times the federal poverty line. For a family of four for tax year 2014, that means income from $23,550 to $94,200.
Third, you can’t be eligible for other coverage, such as Medicare, Medicaid, or sufficiently generous employer-sponsored coverage
Time Magazine’s “Swampland” wrote this on October 30, 2013, “The ACA subsidies are technically tax credits, but consumers can’t apply for them later when they file their income tax returns. The subsidies are only available when consumers purchase coverage through the exchanges, according to CMS. ‘As far as retroactive premium tax credits for a plan outside the exchange, you can’t do that under the statute,’ says Timothy S. Jost, a professor at Washington and Lee University and an expert on provisions of the new law.”
CMS leaves the financing of this new decision to the insurers to handle. In both instances mentioned above, CMS tells insurers to refund or credit any enrollee any excess cost sharing or premium paid that was accrued during the retroactive period. CMS only gives the insurers 45 calendar days from the “date of discovery of the excess cost-sharing or premium paid” to accomplish this task. Meanwhile CMS can continue to change that law at whim and expect everyone else to comply immediately.
But what, there’s more! On March 5, CMS issued guidance that will allow Obamacare non-compliant plans to be renewed for two more years, until October 2016, conveniently by-passing the mid-term elections scheduled for November 2014. If renewed by October 2016, a person is purchasing coverage into 2017, thus getting them by the presidential election as well. Of course the plans being renewed are the “substandard,” “junk” plans that are created by those “bad apple” insurers.
Philip Kline in the Washington Examiner reports, “A supposedly temporary ‘fix’ that President Obama announced in November to address the problem of the millions of Americans who lost coverage as a result of his health care law has now been extended through Oct. 1, 2016… In an attempt to limit the disruption to the insurance industry that would be caused by the move, HHS also announced that the “risk corridor” program (which has been described as a “bailout” to insurers) would be further modified to funnel more money to insurers in states affected by the change. The move, which the Hill reported on earlier this week, comes as vulnerable Democrats are struggling to defend their support for Obamacare in a midterm election year.”
Kline also discusses a bigger problem:
Looking at the issue more broadly, the change undermines a central rationale for Obama’s health care law.
Obama and his allies long-defended the outlawing of certain health care plans, arguing that they were substandard. And they argued that depriving people of the ability to purchase such plans was essential to making the health care law work. If young and healthy people can purchase cheap health insurance with fewer benefits, they argue, it would make coverage more expensive for older and sicker Americans.
Now, not only is Obama saying that these legacy plans can remain, but he’s saying they can stay alive for three years longer than intended. If they can be extended for three years, the new rules may never fully go into effect (unless Obama will allow a wave of cancellations in October 2016, just before the presidential election). And maintaining these plans will further drive up the cost of insurance on the exchanges.
It’s hard to see how this two-tiered health care system can sustain itself. Obama is saying that some individuals get to keep their old, cheaper and better health insurance plans. But other individuals are forced into an increasingly expensive insurance market.
CMS said when they issued the guidance, “As part of ongoing efforts to implement the Affordable Care Act, HHS has heard from families, states, businesses, health professionals, Congress, insurance commissioners, and insurers who want certainty on what’s coming as early as possible so that they can plan ahead. The policies being announced today are another step in our ongoing efforts to bring millions of Americans access to affordable coverage.”
But this guidance will not grant certainty. The guidance provides “insurers the option, if permitted by their state, to renew their current policies for current enrollees without adopting all of the 2014 market rule changes.” The problem is the ruling is just guidance, not what is written in the law. That places insurers at risk. Plus, if the state doesn’t allow plans to be renewed or the insurer feels it cannot renew a non-compliant Obamacare policy, it will be they who get blamed for dumped policies, not the Obama administration for their incompetence.
It is ultimately the policy that is awry, not the malfunctioning websites that will lead to Obamacare’s demise. Already news reports of surveys are trickling out that demonstrate the formally uninsured are not the ones enrolling in Obamacare, the main purpose of the law.
Sooner or later the piper must and will be paid for this failing healthcare “reform” law.
* It should be noted that an ongoing controversy is winding its way through the courts. The concern is whether citizens that purchase an Obamacare health plan through the federally-run exchanges, now operating in 27 states, are entitled to taxpayer subsidies to help pay for premiums and co-pays. Opponents of Obamacare believe the law only allows subsidies to be distributed through a state-run exchange but the IRS has determined otherwise. If the courts should ultimately rule that the opponents are correct, most of Obamacare would collapse.
The law says, in Section 1401, that premium support may be “offered in the individual market within a State which cover the taxpayer, the taxpayer’s spouse, or any dependent (as defined in section 152) of the taxpayer and which were enrolled in through an Exchange established by the State under 1311 of the Patient Protection and Affordable Care Act…”
A great synopsis of the issue is written by Allahpundit in Hot Air in which he gives a run-down on a recent court decision in Halbig v. Sebelius, one of the cases winding through the courts. This case has recently been appealed. Allahpundit also notes Jonathan Adler’s piece from December 2012 in The Volokh Conspiracy. Adler, who penned an Amicus Brief along with Michael Cannon of the CATO Institute, for Halbig v. Sebelius, explains that Congress wanted the states to develop and run the exchanges, not the federal government, and provided tax credits toward the purchase of health plans as an incentive. The credits are also a tool to keep the states operating the exchange the way the federal government wants them to be run.
One of these cases could end up in front of the Supreme Court.
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