More thoughts on the legality of the like it/keep it fix.

Yesterday, President Obama held a lengthy press conference in which he took responsibility for recent problems in the implementation of the Patient Protection and Affordable Care Act and announced that the Administration would allow health insurers to re-establish certain canceled plans for 2014 even if they do not comply with the PPACA.  Specifically, he said “we’re going to extend [the principle behind the grandfather clause] both to people whose plans have changed since the law took effect and to people who bought plans since the law took effect.”

Jonathan Adler at Volokh, co-blogger Chris Robertson here at Bill of Health, Nicholas Bagley at The Incidental Economist, and Seth Chandler at ACA Death Spiral, have all offered thoughts on the legality of the President’s decision to grandfather administratively plans that were being canceled for non-compliance with certain PPACA requirements.  House Speaker John Boehner, for his part, said of the move: “I’m highly skeptical they can do this administratively.  I just don’t see within the law their ability to do it.”

I’ve a few thoughts of my own to add on the prospects for a successful lawsuit challenging the fix:

  1. Non-compliance with the individual mandate.  Following up on Chris Robertson’s post from earlier today, Adler has updated his post once again to cite Section 300gg-6 of the PPACA, which does appear to prohibit plans from offering non-compliant insurance at all in the individual and small group markets.
  2. “Transition relief.”  Bagley was correct to hypothesize that the Administration would invoke the same inherent “transition relief” authority it invoked when it delayed the employer mandate to justify this fix.  While the President did not offer a legal basis and the “Dear Commissioner” letter that the CMS sent out explaining the policy does not cite any authority for the power it asserts to forgive non-compliance, it does refer to the delay repeatedly as a “transitional policy.”   As with the employer mandate, I suspect that the Administration will ultimately issue an announcement explaining that it will not be enforcing the tax penalties and other sticks that back up the various plan requirements of the PPACA.
  3. Standing.  Co-blogger Jeremy Kreisberg and I were talking through possible routes to standing here, and I came away thinking a couple are plausible.  First, an insurer that does not offer any plans subject to the “fix” (or has few such plans) might invoke competitor standing, on the view that the “fix” gives administratively-grandfathered plans a competitive advantage (they don’t have to comply with certain regulatory requirements).  Louisiana Insurance Commissioner Jim Donelon, President of the National Association of Insurance Commissioners, seemed to point toward this sort of harm when he complained that the President’s “[d]ecision continues different rules for different policies.”  Furthermore, I have an intuition that a state insurance commissioner will sue, perhaps just for the political brownie points in a conservative state.  I do not know what the injury would be, but standing doctrine rewards the creative, and courts tend to look favorably on standing for states.
  4. Heckler and pretext.  The Administration is quoted in the Washington Post as invoking its enforcement discretion under Heckler v. Chaney as a basis for the “fix,” a defense that is consistent with the stated rationale for the “transitional policy” authority.  Heckler is a powerful weapon for the Executive Branch, but there are a couple facts about this hypothetical case that distinguish it, in a bad way, from the delay of the employer mandate and the other non-enforcement decisions that the Administration has pointed to as precedent for its “transitional policy” authority.  First, in the case of the employer mandate, the delay came about due to very real compliance difficulties that were being faced by industry.  Here, however, the case for compliance difficulties seems far-fetched because the delay came about after insurers had already complied with the mandate.  In light of the fact that compliance already happened, it would be hard to argue with a straight face that insurers needed this delay.  AHIP seemed to be referencing this when it said “health plans have already met the requirements.”  Second, the President has already offered evidence about the Administration’s actual rationale for this delay: it is to align policy with what people understood it to be because of the President’s statements.  The President said as much at his press conference yesterday, alluding to “assurances [Americans] heard from me” that their plans would not be canceled as the reason the Administration was issuing the “fix.”  I do not know of a Heckler case in which the Plaintiff alleged, and could show from materials in the public record, that (1) the Administration’s purported purpose for non-enforcement (compliance burdens) was demonstrably false and (2) the Administration’s actual purpose for non-enforcement was as unrelated to the purposes of the statute as it would seem to be here.

To be clear, I don’t know how a court would come out (I’d be hesitant to bet against Heckler), let alone how a case challenging the “fix” might come to court.  We may find out in a hurry if someone files a lawsuit and seeks a preliminary injunction—they’d have a decent argument for irreparable harm, with enrollment deadlines coming.  More to come if that happens.

Finally, one other point worth noting: I have read press coverage indicating that this is a total delay and that every canceled plan may now be restored in full, and I can see where President Obama’s remarks give that sense.  But as I read the CMS’s “Dear Commissioner” letter, there are benefit requirements that the policy does not delay.  In particular, § 2713 of the Public Health Service Act, which requires insurers to offer “preventive services” and is the regulatory basis for the “contraception mandate,” is not listed among the delayed provisions.  But I may be missing something.

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