House Republicans and Trump Administration Rush to Delay Case that Would Upend Insurance Market

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Now that Republicans control both the Congress and the executive branches of government, they are rethinking their effort to upend the health insurance market.

A lawsuit was originally filed by House Republicans in 2014 challenging the constitutionality of the Obama administration's authorization and payment of funds from the U.S. Treasury to subsidize insurance companies helping keep deductibles and other out of pocket costs low for low-income consumers.

Those subsidies are now that the core of what insurance executives say keep the markets from tipping into a "death spiral."

"Death spiral" is how Aetna CEO Mark Bertolini summed it up the health insurance markets, predicting that plans will flee, creating insurance deserts in swathes of the country.

President Donald Trump blasted out Bertolini's remark in a tweet and met with executives to discuss options.  Among what the executives requested  was keeping the multi-billion dollar subsidies the insurance companies receive, which allows them to sell plans to sick customers which, they say, are unprofitable.

The Affordable Care Act requires insurance companies to sell health plans to individuals regardless of medical condition.

The prior practice of excluding people with medical conditions from coverage resulted in tens of millions of uninsured Americans, costing the U.S. economy billions of dollars in lost productivity and many billions more in emergency room visits.

In May of 2016, a federal district court ruled that the subsidies required Congressional authorization and the administration violated the separation of powers clause of the Constitution when it directed the payment of the subsidy funds.  The District Court issued a stay against enforcement of its order invalidating the payments to permit the Obama administration to appeal the decision.  This is where the case sat when President Trump took the oath of office.

At present, the Trump administration could simply discontinue the payment of subsidies to insurers and the case would be over.  Stopping the subsidies would make the case moot.  Ending the subsidies would certainly seem to be consistent with the Trump administration's desire to repeal the Affordable Care Act.  It would also seem to be consistent with the desire of House Republicans who brought the lawsuit to end the subsidies to start with.

But some insurance executives have gone so far as to suggest ending the multi-billion dollar subsidies would create chaos in the insurance market, sharply increase premiums, and result in the withdrawal by some insurers from the insurance markets.  Taking away the subsidies would certainly require insurance companies to absorb losses attributable to low income individuals, losses that the subsidies now offset.

So, on January 21, 2017, House Republicans and the Trump administration, filed joint motions to delay a ruling in the case.  The purpose for making the motions was "to allow time for a resolution that would obviate the need for judicial determination" of the appeal.  The motions ask the court to extend an enforcement stay indefinitely.

The Trump administration, which hasn't yet delivered its promised repeal and replace plan to Congress, is sending mixed signals, according to John Sarno, president of the Employers Association of New Jersey.

"One minute it's weakening Obamacare by taking steps that suppress enrollment. Another minute it's trying to entice insurers to stick around long enough to transition to an eventual GOP replacement - but with steps that industry analysts say may fall short." he says.

"I don't know that [staying the lawsuit] is going to keep insurers in if they were otherwise inclined to exit," says Sarno.

On February 27th, president Trump met the CEOs of the big five health insurance companies to discuss both short-term stabilization challenges and long-term ACA replacement ideas.  For now, the insurance industry will continue receiving the subsidies and regulators will continue to take steps to improve the risk pool and stabilize the individual and small group markets, including allowing plan  issuers to collect unpaid premiums prior to reenrolling an individual in the next year's plan.

Going forward, Secretary of Health and Human Services Tom Price was put in charge of stabilizing the insurance markets while the ACA is repealed and replaced.

Join EANJ's president John Sarno on March 24th for a FREE conference to hear and learn from the state's foremost experts on New Jersey's response to Repeal and Replace.