Health Insurers Worried That Obamacare Might Have to Be Implemented as Written

Imagine you’re a health insurer
participating in Obamacare’s exchanges. There are some things you
don’t like: The back end of the federal exchange, which is supposed
to handle payments to insurers, still isn’t finished. There are
some things you’d like to see changed: Insurers currently aren’t
allowed to offer plans below a certain actuarial value—the average
amount of medical expenses covered for people in the plan—although
there are currently proposals to change this.

But even still, it’s not a bad arrangement: Americans are
generally required to buy the product you sell, they are heavily
subsidized by the federal government, and if your expenses for
exchange-based plans come in more than a bit higher than expected,
the federal government will cover a significant percentage of your
overage.

All in all, you’ve got a fairly generous setup. But you probably
have some worries. For instance, what about those
lawsuits contending that, because the text of Obamacare only allows
subsidies in state-established exchanges, only state-established
exchanges should be allowed to disburse subsidies? Imagine what
would happen if those crazy legal challenges were actually
successful. That might be a problem for insurers, given that the
majority of exchanges were established by the federal government,
not states. 

Now, many of the health law’s supporters have argued that the
challenge is an extended legal joke—an error in wording, not a
serious legal challenge. Only an anti-Obamacare cynic, a
text-obsessed nihilist, could think that when Congress wrote and
passed legislation specifying that subsidies would be available in
state-established exchanges that Congress actually meant this
literally. Or, well,
Jonathan Gruber, who helped draft the federal health law and
the Massachusetts health reform it was based on. But that’s neither
here nor there.

If you’re an insurer, however, you might not be so sure. You see
this Gruber fellow
saying, all the way back in 2012, that “if you’re a state and
you don’t set up an exchange, that means your citizens don’t get
their tax credits.” (He’s since changed his mind, and says he
previously misspoke on multiple occasions.) And you see a
couple of court decisions that seem to buy into the odd notion
that the plain, unambiguous text of the law is the clearest
expression of congressional intent. You notice that, even when a
court disagrees with the challengers, it agrees that they kind of
have a point,
as the Fourth Circuit did when it admitted that “a literal
reading of the statute undoubtedly accords more closely with their
position.”

Sure, one of the decisions in favor of the challengers has now
gone to a full court review, which is
expected to be more favorable to the administration. But
overall, the whole situation looks kind of dicey.

And so, since you’re an insurer, you’d probably want, well,
insurance against the prospect that these oddball legal
literalists, who think the law should be implemented in the
explicit way that the text of the law states, and not some
impressionistic way that better fits the administration’s purposes,
might actually win.

As CNBC notes,
that’s just what insurers sought and eventually got from the Obama
administration in the latest round of health exchange
contracts:

These insurers will sell you some Obamacare—at least as long as
the government is footing the bill for most of their customers.

Insurers doing business on HealthCare.gov will be
allowed to terminate their health plans if there’s a halt on
federal tax credits that help most Obamacare customers buy the
coverage, according to new language for 2015
contracts.…The language in the contracts, without saying so
overtly, recognizes that there is a chance that those challenges
could succeed.

In other words, if you’re an insurer, you might be worried. And
you might have good reason to be.