Halbig: Exemption of Territories from Coverage Requirements Now Understandable As a Litigation Strategy
Remember this odd story from the other day?
Looking for a place where Obamacare doesn’t exist? Try moving to the U.S. Territories, where the Obama administration just provided a pretty big waiver from the law’s major coverage provisions.
The Affordable Care Act’s design dealt a pretty big problem to the territories. It required insurers there to comply with the law’s major market reforms — guaranteed coverage, mandated benefits, limits on profits, etc. — without requiring residents to get coverage or providing subsidies to help them afford coverage. The territories — Puerto Rico, the U.S. Virgin Islands, American Samoa, Guam and the Northern Mariana Islands — have been warning for years that would destroy their insurance markets. The individual mandate and the subsidies are the major ways the ACA tries to bring healthy people into the individual insurance market to balance out sick patients who can no longer be denied coverage.
That was until Wednesday, when the Obama administration told the territories that the coverage requirements actually don’t apply to them. The exemption was posted on a Health and Human Services Web site on Thursday.
This seemed a little puzzling . . . until you read the Halbig decision. Then everything comes into focus: they were sacrificing coverage in the territories to establish a litigation position ahead of the decision.
Here it is in a nutshell. The government argued that the law provided a “three-legged stool” — and the three legs were: (1) “guaranteed issue” (where insurance companies must issue coverage to those with pre-existing conditions); (2) the mandate; and (3) subsidies. The government said that you can’t remove any of these legs without the stool collapsing; therefore the intent to have broad-based subsidies is clear. So, for example, you can’t possibly have a situation where you have “guaranteed issue” unless you have an individual mandate, which establishes a broad base of customers, which makes the economics work for the insurance companies.
The Halbig court replies: sure you can, apparently — because that’s what you do in the territories:
Yet the supposedly unthinkable scenario the government and dissent describe—one in which insurers in states with federal Exchanges remain subject to the community rating and guaranteed issue requirements but lack a broad base of healthy customers to stabilize prices and avoid adverse selection—is exactly what the ACA enacts in such federal territories as the Northern Mariana Islands, where the Act imposes guaranteed issue and community rating requirements without an individual mandate. . . . This combination, predictably, has thrown individual insurance markets in the territories into turmoil. . . . But HHS has nevertheless refused to exempt the territories from the guaranteed issue and community rating requirements, recognizing that, “[h]owever meritorious” the reasons for doing so might be, “HHS is not authorized to choose which provisions of the [ACA] might apply to the territories.”
My guess is that the Government knew that the court was going to be making this argument, somehow — and the Government wanted to be able to tell the Supreme Court (or en banc D.C. Circuit) that it had, in fact, exempted the territories. They wanted not to seem reactive to the Halbig decision — so they made sure to make the announcement before the decision came out.
My favorite part is the quote from HHS: “HHS is not authorized to choose which provisions of the [ACA] might apply to the territories.” Right before they did exactly that.
When the Government trumpets that exemption before future courts, the lawyer for Halbig et al. had better be ready with that quote.
Is HHS allowed to exempt the territories? Apparently, the Obama administration answers as a character from a Monty Python sketch: No! No! No! . . . Yes. A bit.