California’s Health Insurance Debacle

When it comes to the changes in health insurance markets this year, Peter Lee, the head of California’s health insurance Exchange, is quick to criticize officials in other states: “Shame on the insurance commissioners who didn’t think ahead,” he told Politico in October. But to quote Winston Churchill, Mr. Lee should be more modest—because he has much to be modest about.

Responses to Public Records Act requests reveal that neither Mr. Lee nor any official at Covered California, the state-run Exchange, even considered the withdrawal of cost-sharing reduction payments to insurers when setting rates for the 2017 plan year. Just as Mr. Lee has accused others of not preparing for insurance market changes in the coming year, so too he and his colleagues failed to anticipate the sizable changes that took place this year when setting 2017 rates last fall.

This October, President Trump withdrew those cost-sharing reduction payments to insurers. His decision should not have come as a shock, and not just because he had threatened to do so for some time. The payments themselves had been on shaky ground for over a year; Judge Rosemary Collyer called the payments unconstitutional and ordered them stopped in a May 2016 ruling.

When California and other states finalized 2017 premium rates last summer, the cost-sharing payments appeared in significant jeopardy. Judge Collyer had stayed her May 2016 ruling as the Obama Administration appealed it, but another court could have ordered the payments stopped. Moreover, as I noted last year, the incoming Administration could easily stop the payments unilaterally in a matter of days—what President Trump ultimately did in October.

Given this tenuous environment for cost-sharing payments, what due diligence did Covered California undertake last year to determine whether the federal government would continue making payments in 2017? In a word, nothing. Not an e-mail, not a legal analysis, not a memo—nothing.

Only months after Covered California finalized its premium rates for 2017 did Mr. Lee finally jump into action. Two weeks after Trump’s election, a series of urgent e-mails including Mr. Lee discussed the court case regarding cost-sharing payments. Covered California invoked attorney-client privilege to redact the contents of the e-mail chain, but it doesn’t take a rocket scientist to determine that the chain consisted of panicked officials responding to events they had not anticipated.

Because they did not anticipate those events when setting 2017 premiums last summer, California health insurers will suffer financial losses. Insurers must now lower deductibles and co-payments for low-income individuals—a federal requirement under the health care law—without the federal government reimbursing them for that reduced cost-sharing. As a result, insurers in the Golden State will incur their share of up to $1.75 billion in losses nationwide, according to a recent court filing by the industry’s trade association.

Just as they failed to anticipate the loss of cost-sharing subsidies when setting rates for 2017, California officials have failed to accept responsibility for their regulatory failure. When in June I wrote that California’s Insurance Commissioner, Dave Jones, also failed to consider the impact of cost-sharing payments on rates for 2017, Mr. Jones responded with a series of attacks on President Trump. But if Mr. Trump represents such a threat to California’s health insurance market, then Messrs. Jones and Lee both should have spent time analyzing the impact of a Trump presidency on that market prior to his election. The record clearly demonstrates that neither did so.

Mr. Lee’s negligent behavior towards California’s individual health insurance market may stem from the fact that he does not participate in it himself. Despite receiving an annual salary of $436,800, and bonuses in the tens of thousands of dollars, Mr. Lee refuses to buy the Exchange policies he sells, choosing instead to have taxpayers fund his health insurance through CalPERS.

Perhaps Covered California should make a one-percenter like Mr. Lee purchase his insurance with the hoi polloi, so that he might understand the needs of Exchange customers by actually becoming one himself. Better yet, it could find a new Executive Director, one who spends less time tooting his own horn and more time anticipating changes in the market that were predictable—and predicted—long ago.

This post was originally published at the Orange County Register.

Three Key Questions about the Obamacare “Stability” Bill

On Wednesday afternoon, Sens. Susan Collins (R-ME) and Lamar Alexander (R-TN) announced they would postpone until the New Year their request for considering an Obamacare “stability” bill. Their statement capped a sequence of developments that raised almost as many questions as it answered—about the “stability” bill, the process used to consider it, and Obamacare itself.

1. If Congress Just ‘Essentially’ Repealed Obamacare, Why Pass a Bill to Prop It Up?

Ahead of final passage of the tax bill on Wednesday, President Trump claimed at a cabinet meeting that “when the individual mandate is being repealed” in the tax bill, “that means Obamacare is being repealed. We have essentially repealed Obamacare.”

The president overstated his case, of course. Congress has not repealed the law, nor has it repealed the “heart” of the law, as Sen. Mitch McConnell claimed on Thursday—and the debate on the “stability” bill explains why. The heart of Obamacare rests in its insurance regulations, all of which remain in place following the mandate’s repeal. Without the individual mandate—designed to compel healthy individuals to purchase government-required health coverage, thereby subsidizing the sick—premiums could increase.

Collins and Alexander wish to “solve” this problem not by repealing Obamacare’s insurance regulations—which would lower premiums and increase health care choices—but instead by throwing tens of billions of taxpayer dollars at the problem through the “stability” bill.

2. Why Did Susan Collins Ever Assume Mitch McConnell Spoke for Congress?

Reporters have raised numerous questions—to which Collins has taken offense—about whether Maine’s senior senator was “duped” into supporting repeal of the mandate in the tax bill in exchange for Sen. Mitch McConnell’s support of the “stability” measure. And with good reason. Enactment of the “stability” bill would require 1) at least 60 votes in the Senate to overcome a possible filibuster and 2) consent of Speaker Paul Ryan (R-WI) and House Republican leadership to bring it to the floor for a vote. Under no circumstance does either lie solely within McConnell’s gift.

And if Collins, having served in the Senate for more than two decades, believed that the Senate majority leader could single-handedly determine whether the “stability” bill got enacted into law, let’s just say I have some land to sell her.

3. Does the White House Support Federal Funding of Abortion Coverage, Or Not?

Wednesday’s statement of support for the “stability” bill by the unnamed White House official—why won’t anyone in the White House go on-the-record about this legislation?—said nothing about one of the main controversies surrounding the measure: Whether it will contain strong pro-life protections. The White House has not indicated whether it has conditioned its support for a “stability” bill on inclusion of pro-life funding language, thus opening the possibility that President Trump will sign a bill including tens of billions in taxpayer funding for plans that cover abortion.

Republicans have argued for seven years that any executive order—whether issued by President Obama, President Trump, or any president—cannot adequately protect federal tax dollars from flowing to plans that cover abortion. When coupled with its endorsement of Obamacare “stability” legislation, the White House’s deafening silence on the life issue speaks volumes. Conservatives have numerous reasons to worry, for a “stability” bill that bolsters both Obamacare and abortion would represent a twofold violation of long and deeply held principles.

This post was originally published at The Federalist.

Why Medicare Reform Can’t Wait

In an interview with “Good Morning America” on Wednesday, House Speaker Paul Ryan (R-WI) cast doubt on the prospect for comprehensive Medicare reform on the congressional agenda in 2018: “There are some provider issues that we may be addressing as you know. Some providers in the Medicare field in some cases are getting overpaid. We want to make sure that’s being dealt with. But as far as you’re talking about beneficiaries, we’re not focused on that.”

Unfortunately, however, if Congress fails to address comprehensive Medicare reform, beneficiaries will miss out on significant savings in their pocketbooks, and taxpayers will miss out on the opportunity to slow the growth of the program’s expenses. This “win-win” proposition—seniors save money, as do taxpayers—could help the federal government solve its growing entitlement shortfalls, but only if Congress has the courage to act.

How Medicare Reform Would Work

To the uninitiated, premium support would transform Medicare into a program roughly akin to the federal employee health benefit plan, or the Obamacare exchanges established in 2014. Insurers, including traditional government-run Medicare, would bid against each other to offer the usual complement of Medicare services.

In each bidding area, whether a county, state, or region, officials would determine a “benchmark” bid—based on, for instance, the average of all plan bids, or the second-lowest plan bid. (Obamacare exchanges use the second-lowest plan bid.) Beneficiaries would receive a sum from the federal government to cover the cost of a benchmark plan in their area. If a senior selected a plan costing less than the benchmark amount, he or she would receive the difference in savings; conversely, if a senior selected a plan costing more than the benchmark, he or she would pay the difference in higher premiums.

New Report Shows Increased Savings

Compared to an earlier CBO report released in September 2013, the updated analysis shows greater savings from implementing premium support. In ten-year budget terms, the second-lowest bid option would save $419 billion, while the average bid option would save $184 billion—up from $275 billion and $69 billion, respectively, four years ago.

The October report cited several factors that put both upward and downward pressure on the amount of federal savings. In general, however, two factors stood out. First, Congress passed a law repealing the Medicare sustainable growth rate mechanism in 2015. That law increased projected spending in traditional fee-for-service Medicare, making it less financially competitive when compared to private Medicare Advantage plans.

Second, the Medicare Advantage plans have become more efficient, reducing their bids when compared to traditional Medicare. With plans already operating in a more competitive environment, the federal government could achieve greater savings by altering the bidding structure to harness that competitive environment.

Let’s Compare the Two Options

In general, while the second-lowest bid option would achieve greater savings for the federal government, the average bid option seems the likeliest to achieve the political consensus necessary to ensure its enactment. Setting a lower benchmark, as the second-lowest bid option would do in most if not all markets, would require more seniors to pay additional premiums, as more plans would exceed the benchmark.

To this conservative, the average bid option seems much more politically palatable. While any plan will result in confusion and controversy, one that will save both taxpayers and seniors money provides a strong incentive to transition to a new system. Congress can adjust the formula over time as needed, to reflect any difficulties in implementation and changes in our fiscal outlook. But the transition should happen—sooner rather than later.

Republicans Need to Combat ‘Mediscare’ Tactics

Of course, enacting Medicare reform involves overcoming partisan attacks and demagoguery—as the ads depicting Republicans throwing granny off a cliff so vividly illustrate. Democrats ran those ads against Ryan in the past, and no doubt will do so again the minute conservatives contemplate a serious effort to reform Medicare.

But conservatives—and Congress as a whole—have no choice but to reform entitlements. As previously noted, Medicare would already be financially insolvent but for Obamacare’s fiscal gimmickry—the accounting scheme that allows Medicare savings simultaneously to make Medicare solvent and fund Obamacare.

This post was originally published at The Federalist.

What Exactly Is in the Obamacare “Stability” Deal?

Memo to Rand Paul: It’s time to fire up the copier again.

On Tuesday, the simmering controversy over Obamacare “stability” legislation came to the boil, as conservatives increasingly voiced objections at bailing out Obamacare and giving tens of billions of taxpayer dollars to fund abortion coverage in the process. But the controversy centers around a “deal” of which the precise contents remain a closely guarded secret.

But at least Democrats (eventually) made the text of the Cornhusker Kickback, Louisiana Purchase, Gator Aid, and other provisions public. For the Obamacare “stability” bill, Senate Republican leaders have yet to indicate exactly what legislation they wish to pass.

Substance and Process Unclear

As I noted last week, while Sen. Lamar Alexander (R-TN) recently claimed in an op-ed that the “stability” legislation would appropriate $10 billion in reinsurance funds for insurers, the public version of legislation to which he referred—a bill introduced by Sens. Susan Collins (R-ME) and Bill Nelson (D-FL)—appropriated “only” $4.5 billion in funds to health insurers. Collins and Alexander are apparently engaging in a bidding war with themselves about how many billions worth of taxpayer dollars they wish to spend on corporate welfare payments to insurance companies.

On the policy substance, Senate leadership has refused to disclose exactly what provisions comprise the “deal” Collins supposedly cut with Senate leadership. Did they promise $4.5 billion in reinsurance funding, $10 billion, or more than $10 billion? What other promises did they make in exchange for Collins’ support for repealing the individual mandate in the tax bill?

Did Republican leaders pledge merely to support an open process and a vote on the “stability” measure—as Senate Republican Conference Chairman John Thune (R-SD) implied on Tuesday—or its enactment into law? How exactly could they promise the latter, when any such bill would require 60 votes to break a potential Senate filibuster—a number that Senate Republican leaders do not have, even if they could persuade their entire conference to support bailing out Obamacare?

Then and Now

As noted above, we’ve seen this play before, when Democrats rammed through Obamacare through a series of backroom deals cobbled together behind closed doors, notwithstanding then-candidate Obama’s pledge to televise all health-care negotiations on C-SPAN. Here’s what McConnell had to say about that lack of transparency in a December 2009 floor speech:

Americans are right to be stunned because this bill is a mess. And so was the process that was used to get it over the finish line.

Americans are outraged by the last-minute, closed-door, sweetheart deals that were made to gain the slimmest margin for passage of a bill that is all about their health care. Once the Sun came up, Americans could see all the deals that were tucked inside this grab bag, and they do not like what they are finding. After all, common sense dictates that anytime Congress rushes, Congress stumbles. It is whether Senator so-and-so got a sweet enough deal to sign off on it. Well, Senator so-and-so might have gotten his deal, but the American people have not signed off.

Public opinion is clear. What have we become as a body if we are not even listening to the people we serve? What have we become if we are more concerned about a political victory or some hollow call to history than we are about actually solving the problems the American people sent us here to address?

Some may argue that passing “stability” legislation bears little comparison to home-state earmarks like the Cornhusker Kickback that plagued the Obamacare bill the Senate passed on Christmas Eve 2009. But when Alexander remains adamant about passing “stability” legislation about which senators of both parties now seem ambivalent at best, one must ask whether his insistence stems from the fact that it would provide a significant financial windfall to his biggest campaign contributor—making it a “sweet enough deal” for him too.

The fact that no Senate leaders will dare explain publicly what they have promised privately should tell the public everything they need to know about the merits of this secretive backroom deal. As McConnell might say, it’s “kind of [a] smelly proposition.”

This post was originally published at The Federalist.

Are Senate Republicans Planning an Abortion Flip-Flop in Obamacare “Stability” Bill?

As Yogi Berra would say, “It’s déjà vu all over again.” Once again, Senate Republicans are preparing to flip-flop on taxpayer funding of plans that cover abortion. In June, I discussed how unnamed Senate Republican sources claimed that their “repeal-and-replace” legislation would preserve Obamacare’s “restrictions on abortion funding,” even though Republicans have spent the past seven years arguing that the law provides taxpayer funding of plans that cover abortion.

Those same unnamed sources are now trying to claim that the Obamacare “stability” bill does not need additional restrictions on abortion funding. As Politico reports:

[Senate Republicans are] stressing that Obamacare already has prohibitions on using federal funds for abortions that are not because of rape or incest or to save the mother’s life. Anti-abortion groups didn’t trust the Obama Administration to enforce those prohibitions. That prohibition could carry more weight now. ‘We have a pro-life Administration that has agreed to more stringently enforce the life protections,’ a Senate Republican source said.

Let’s Go Down Memory Lane

In June, I cited several floor speeches during the Obamacare debate where congressional leaders argued that Obamacare includes taxpayer funding of abortions. For instance, here’s Senate Majority Leader Mitch McConnell (R-KY), as the House prepared to vote on Obamacare: “Democrats over in the House want to approve the Senate bill without actually voting on it. These Democrats want to approve a bill that rewrites one-sixth of the economy, forces taxpayers to pay for abortions, raises taxes in the middle of a recession, and slashes Medicare for seniors, without leaving their fingerprints on it” (emphasis mine).

Astute observers might notice the wording of McConnell’s remarks. The Senate majority leader did not say that “Obamacare might force taxpayers to fund abortion coverage, depending upon how the administration implements the law.” He did not say that “We need to elect a pro-life administration to prevent Obamacare from providing taxpayer funding of abortion coverage.” He flatly stated that Obamacare “forces taxpayers to pay for abortions”—period, end of story.

Mr. Speaker, the bill before us tonight doesn’t fix anything. It doesn’t fix the fact that this is a government takeover of health care that’s going to mandate that every American buy health insurance whether they want it or need it or not. It doesn’t fix the fact that it includes about $600 billion in job-killing tax increases in the worst economy in 30 years. It doesn’t fix the fact this bill provides public funding for elective abortion for the first time in American history (emphasis added).

Law Trumps Executive Action

McConnell, Pence, and many others had good reason for their statements. As Sen. Orrin Hatch (R-UT) noted in December 2009, Obamacare’s abortion funding restrictions are “significantly weaker” than the Hyde Amendment—a provision designed to prevent taxpayer funding of abortion since 1976—making them “completely unacceptable” in Hatch’s view, and in the view of most pro-lifers.

As to Republican staffers’ claims that the Trump administration can “fix” the flawed statutory language through executive orders or more robust enforcement, here’s what pro-life Rep. Jim Sensenbrenner (R-WI) had to say about that in March 2010:

This bill expands abortion funding to the greatest extent in history. I have heard that the President is contemplating an executive order to try to limit this. Members should not be fooled. Executive orders cannot override the clear intent of a statute….If an executive order moves the abortion funding in this bill away from where it is now, it will be struck down as unconstitutional because executive orders cannot constitutionally do that.

Other House members made the same argument in March 2010, including Dan Lungren (R-CA) and Joe Pitts (R-PA). Their argument applies just as equally to Republican presidents and administrations as it does to Democratic ones.

Moreover, conservatives who believe in limited government should not ask President Trump to exceed his executive authority, and a blanket funding on Obamacare’s abortion coverage would do just that. As I wrote in January, “a Republican Administration should not be tempted to ‘use unilateral actions to achieve conservative ends.’ Such behavior represents a contradiction in terms.” Not only can the Trump administration not stop funding of abortion coverage unilaterally, it should not attempt to try, if doing so would exceed its legal authority.

Don’t Insult Voters’ Intelligence

Just as the Trump administration should not try to exceed its authority in shutting down federal funding of abortion coverage, Senate Republicans should not attempt to insult voters by pretending that those efforts will succeed legally, or that the “completely unacceptable” abortion “protections” Hatch described in 2009 are now sufficient.

Senate Republicans have already attempted to claim that the insurer “stability” bill will bring benefits to taxpayers, even though the non-partisan Congressional Budget Office believes the bill will give a windfall directly to insurance companies. They should not worsen the spectacle of rationalizing bad policy by attempting to render seven years of arguments they made to the pro-life community meaningless—for they only beclown themselves in the process.

This post was originally published at The Federalist.

The House’s Unwise Proposed Settlement in the Obamacare Payments Court Case

After filing a lawsuit to defend its constitutional “power of the purse” more than three years ago, the House of Representatives late Friday proposed a settlement in the case over Obamacare’s cost-sharing reduction payments to insurers. In their fight to preserve the House’s constitutional authority, and stop propping up Obamacare, the proposed settlement would give conservatives precious little.

The House originally filed suit to accomplish three objectives: 1) halt the cost-sharing reduction payments; 2) keep a future administration from restarting the payments; and 3) set the precedent that the legislative branch can file suit against the executive when the executive exceeds its constitutional authority.

The Issue and the Lawsuit

The dispute involves Obamacare’s cost-sharing reduction (CSR) payments, designed to lower deductibles and co-payments through taxpayer subsidies for individuals purchasing exchange coverage. The law instructed insurers to lower cost-sharing for certain low-income individuals, and instructed the Department of Health and Human Services to reimburse insurers for providing these discounts, but included no explicit appropriation for the reimbursements.

Despite the lack of an express appropriation, the Obama administration started making CSR payments to insurers when the exchanges launched in 2014. The House of Representatives, viewing those actions as violating its constitutional authority, sued to stop the payments that fall.

In September 2015, Judge Rosemary Collyer ruled that the House had standing to challenge the constitutionality of the Obama administration’s actions in court. In May 2016, Collyer also agreed with the House on the merits, ruling that Obamacare lacked an appropriation for CSRs, that the Obama administration overstepped its authority, and that the payments must cease unless and until Congress provided an explicit appropriation.

Over the summer, a group of Democratic state attorneys general asked for, and received, permission from the Court of Appeals to intervene in the House’s lawsuit. The attorneys general argued that the change in administration meant neither party to the case would properly represent their interests in ensuring Obamacare’s implementation.

The Proposed Settlement

In Friday’s filing, all three parties—the Trump administration, the House, and the Democratic attorneys general—asked the Court of Appeals to remand the case to Collyer, and for Collyer to accept their settlement arrangement. The settlement would have Collyer vacate her order preventing the executive from making CSR payments.

Regarding other elements of the dispute and the status of CSR payments going forward, the proposed settlement includes this paragraph:

The Parties recognize that the Executive Branch of the United States Government (‘Executive Branch’) continues to disagree with the district court’s non-merits holdings, including its conclusion that the House had standing and a cause of action to bring this suit. The Parties agree that because subsequent developments have obviated the need to resolve those issues in an appeal in this case, the district court’s holdings on those issues should not in any way control the resolution of the same or similar issues should they arise in other litigation between the House and the Executive Branch. The Parties also recognize that the States continue to disagree with the district court’s merits holding. Accordingly, if the court of appeals grants the Joint Motion, the Parties agree that the district court’s holding on the merits should not in any way control the resolution of the same or similar issues should they arise in other litigation, and hereby waive any right to argue that the judgment of the district court or any of the district court’s orders or opinions in this case have any preclusive effect in any other litigation.

On the merits—i.e., whether a CSR appropriation exists, and whether the Obama administration acted constitutionally in making said payments—Collyer’s opinion will not control, and none of the parties can cite it in future litigation.

What the Settlement Means

The House “wins” things it already has. The House already won the action it most desired when President Trump agreed to stop the CSR payments in October. Beyond that, the settlement gives the House the right to cite Collyer’s ruling in future cases between Congress and the executive—which it would have done regardless.

The House gives up what it won. By vacating Collyer’s injunction, the settlement allows President Trump, or any future president, unilaterally to reinstitute the CSR payments at any time. Moreover, because the settlement prohibits all parties from using Collyer’s ruling that an appropriation does not exist “in any other litigation,” it will inhibit the House’s ability to protect its institutional prerogatives should any administration attempt to restart the unconstitutional CSR payments in the future.

The Susan Collins Effect? Sen. Susan Collins has insisted that Congress enact legislation appropriating CSR funds before voting to pass a tax bill that repeals the individual mandate. Last week, she repeated assertions from Senate Republican leaders and Vice President Mike Pence that insurers will receive the payments, even as conservatives in the House have objected to passing an appropriation for CSRs. Some may question the timing of this settlement—which, by ending the House’s lawsuit, would give the Trump administration clear sailing to resume the payments unilaterally—and ask whether the administration will now attempt to do so.

Will Other Parties Object?

Given the implications listed above, other parties could object to the settlement. Attorneys general in Republican states, who believe the law clearly lacks an appropriation for CSR payments, could object to the settlement vacating Collyer’s prohibition on the executive making such payments.

Moreover, because the settlement would not resolve the underlying legal issues, those attorneys general would have grounds to intervene—namely, the uncertain regulatory environment that the lack of a definitive ruling on CSRs would create, and the higher costs to state insurance offices due to that uncertainty. Insurers and insurance commissioners would have similar reasons to object to the settlement, although insurers may not wish to “risk” a definitive court ruling stating that a CSR appropriation does not exist.

Regardless, the proposed settlement provides little in the way of tangible results to conservatives who objected to the unconstitutional CSR payments. Conservative members of Congress may therefore wish to state their objections to House leadership, to convince it to change course.

This post was originally published at The Federalist.

Liberals Suddenly Rediscover Federalism — Will Conservatives?

On Thursday, a series of liberal groups sent a letter to the nation’s insurance departments, asking them to effectively undermine President Trump’s October executive order on health care. In so doing, the Left suddenly rediscovered the virtues of federalism in setting an independent policy course from Washington, particularly when governed by an executive of the opposite party.

Unfortunately, however, because Congress has yet to repeal Obamacare’s federally imposed regulations—as I noted just yesterday—legislators in conservative states will have little such recourse to seek freedom from Obamacare unless and until Congress takes action.

Liberals Want to Thwart More Affordable Coverage

For instance, the Trump administration likely will revoke an Obama administration rule prohibiting short-term insurance policies—which need not comply with any of Obamacare’s statutory requirements—from offering plans of longer than 90 days in duration. In such a circumstance, the liberal groups want states to “act swiftly if the federal rulemaking allows these plans to last beyond a reasonable ‘short term’”—in other words, reimpose the 90-day limit on short-term plans, currently codified via federal regulations, on the state level.

The liberal groups also asked states to “consider ways to protect against potential harm from” other elements of the executive order, including association health plans (AHPs) and health reimbursement arrangements (HRAs): “If the proposed federal rules are weakened for short-term plans, AHPs, or HRAs, we urge state insurance regulators to take action to protect consumers in your states.”

In this case, as in most cases with liberal groups, “consumer protection” means protecting individuals from becoming consumers—preventing them from buying insurance plans that liberals do not approve of.

One-Way Federalism, In the Wrong Direction

As a supporter of the Tenth Amendment, while I might not agree with state actions designed to prevent the sale of more affordable insurance options, I respect the rights of states to take such measures. Likewise, if Congress repeals Obamacare’s mandate to purchase insurance, and states wish to reimpose such a requirement at the state level, they absolutely should have the ability to do so.

Unfortunately, however, Congress’ failure to repeal Obamacare’s regulations has created a one-way federalism ratchet. Liberal areas can re-impose Obamacare’s regime at the state level, by blocking the sale of more affordable insurance plans, or re-imposing a mandate to purchase insurance. But because Congress has left all of Obamacare’s federally set regulations in place, conservative states cannot de-impose Obamacare at the state level, to allow more affordable coverage that does not meet all of the law’s requirements.

Admittedly, by not thwarting Trump’s regulatory actions, conservative states can allow the sale of more affordable insurance products—for now. However, those executive actions have real limits when compared to statutory changes.

Moreover, another president could—and in the case of a Democratic president, almost certainly would—undo those actions, collapsing what little freedom the executive order might infuse into the market. Regardless, states will remain hostage to actions in Washington to determine control of their health insurance marketplaces.

This dynamic brings no small amount of irony: Liberal groups have suddenly discovered the benefits of federalism to “resist” a Trump administration initiative, even as Republican senators like Louisiana’s Bill Cassidy, by keeping the federally imposed pre-existing condition mandate in place, want to dictate to other states how their insurance markets should function.

At the risk of sounding like an apostate, liberals are on to something—not with respect to their policy recommendations, but to federalism as a means of achieving them. Perhaps one day, the party that purports to believe in the Tenth Amendment will follow suit, by getting rid of Obamacare’s federal regulations once and for all.

This post was originally published at The Federalist.

Repealing Obamacare Is about the Regulations, Stupid

As Congress considers repealing Obamacare’s individual mandate as part of tax reform, some conservatives believe doing so would “fulfill [Republicans’] promise to the American people” by “return[ing] personal decisions about health care choices to patients.”

In reality, however, repealing only the mandate would accomplish little of the former, and virtually none of the latter. For this conservative, at least, the answer to what would fulfill Republicans’ promise echoes James Carville: At its core, an Obamacare repeal is about the regulations, stupid.

We Don’t Want to Own the Consequences of Our Policies

In 2009, Democrats probably didn’t want to subject themselves to attacks for spending trillions of dollars on new entitlements. They didn’t want to take the political hit for raising taxes and reducing Medicare spending to pay for those entitlements. Also, Democrats—not least Barack “Mandate to Buy a House” Obama, who ran against the mandate in the 2008 presidential primaries—certainly didn’t want to require individuals to purchase government-mandated insurance.

But they realized that imposing unprecedented federal regulations on insurers would raise premiums, necessitating requirements on employers to offer, and individuals to purchase, that costlier coverage, higher spending on subsidies to make that more expensive coverage “affordable,” and new taxes to pay for that higher spending.

By contrast, repealing only the mandate would do nothing to restore health-care freedom, or “return health care choices to patients.” While Americans would not face taxes for not buying coverage they may not want, need, or afford, they would have no greater or lesser ability to buy coverage they do want and can afford than they did in the first place, because all of Obamacare’s regulations would remain in place.

But neither proposal undermined Obamacare’s central principle: That Washington can and should impose myriad regulations on insurers. In fact, by creating an opt-out process at the federal level, both bills effectively reinforced Washington’s control of health insurance.

Both Parties Want to Control Americans’ Health Choices

It’s worth emphasizing the unprecedented nature of the change Obamacare wrought. Since 1947’s McCarran-Ferguson Act, which devolved regulation of insurance to states, the federal government made few and minimal intrusions into health insurance markets—until Obamacare. Yet purportedly conservative lawmakers have not pushed back on this breach of Tenth Amendment principles, with Washington intruding into states’ business.

For instance, Sen. Lindsey Graham (R-SC) claimed the proposal he and Sen. Bill Cassidy (R-LA) introduced would “empower each individual state to choose the path that works best for them.” Unfortunately, however, that plan would keep in place federal dictates regarding pre-existing conditions—the most costly of all the Obamacare mandates. There are other, arguably better, ways to cover individuals with pre-existing conditions than a federally imposed requirement, but by keeping control in Washington, the Graham-Cassidy plan would effectively preclude states from exploring them.

Two years ago, for procedural and tactical reasons, Republicans chose not to attach provisions repealing Obamacare’s insurance regulations to the repeal bill that went to President Obama’s desk. If they fail to repeal—not waive, or opt-out, but repeal—the regulations this time around, they will undermine federalism and fail to meet their promise to eradicate Obamacare “root and branch.”

For both the Tenth Amendment and the American people looking for relief from Obamacare’s spiraling costs, the stakes couldn’t be higher.

This post was originally published at The Federalist.

Exclusive: Congress Should Investigate, Not Bail Out, Health Regulators Who Risked Billions

What if a group of regulators were collectively blindsided by a decision that cost their industry billions of dollars? One might think Congress would investigate the causes of this regulatory debacle, and take steps to ensure it wouldn’t repeat itself.

Think again. President Trump’s October decision to terminate cost-sharing reduction (CSR) subsidy payments to health insurers will inflict serious losses on the industry. For October, November, and December, insurers will reduce deductibles and co-payments for certain low-income exchange enrollees, but will not receive reimbursement from the federal government for doing so. America’s Health Insurance Plans, the industry’s trade association, claimed in a recent court filing that insurance carriers will suffer $1.75 billion in losses over the remainder of 2017 due to the decision.

As Dave Anderson of Duke University recently noted, the “hand grenade” of stopping the cost-sharing reduction payments, “if it was thrown in January or February of this year, would have forced a lot of carriers to do midyear exits and it would have destroyed the exchanges in some states.” Yet Congress has asked not even a single question of regulators why they did not anticipate and plan for this scenario—a recipe for more costly mistakes in the future.

A Brewing Legal and Political Storm

The controversy surrounds federal payments that reimburse insurers for lower deductibles, co-payments, and out-of-pocket expenses for qualifying low-income households purchasing exchange coverage. While the text of Obamacare requires the U.S. Department of Health and Human Services to establish a program to reimburse insurers for providing the discounts, it nowhere includes an explicit appropriation for such spending.

As the exchanges launched in 2014, the Obama administration began making CSR payments to insurers. However, later that year, the House of Representatives, viewing a constitutional infringement on its “power of the purse,” sued to stop the executive from making the payments without an explicit appropriation. In May 2016, Judge Rosemary Collyer ruled the payments unconstitutional absent an express appropriation from Congress.

The next President could easily wade into this issue. Say a Republican is elected and he opts to stop the Treasury making payments related to the subsidies absent an express appropriation from Congress. Such an action could take effect almost immediately….It’s a consideration as carriers submit their bids for next year that come January 2017, the policy landscape for insurers could look far different.

One week after my article, Collyer issued her ruling calling the subsidy payments unconstitutional. At that point, CSR payments faced threats from both the legal and political realms. On the legal front, the ongoing court case could have resulted in an order terminating the payments. On the political side, the new administration would have the power to terminate the payments unilaterally—and it does not appear that either Hillary Clinton or Trump ever publicly committed to maintaining the payments upon taking office.

Yet Commissioners Stood Idly By

In the midst of this gathering storm, what actions did insurance commissioners take last year, as insurers filed their rates for the 2017 plan year—the plan year currently ongoing—to analyze whether cost-sharing payments would continue, and the effects on insurers if they did not? About a week before the Trump administration officially decided to halt the payments, I submitted public records requests to every state insurance commissioner’s office to find out.

Two states (Indiana and Oregon) are still processing my requests, but the results from most other states do not inspire confidence. Although a few states (Illinois, Utah, and California’s Department of Managed Health Care) withheld documents for confidentiality or logistical reasons, I have yet to find a single document during the filing process for the 2017 plan year contemplating the set of circumstances that transpired this fall—namely, a new administration cutting off the CSR payments.

In many cases, states indicated they did not, and do not, question insurers’ assumptions at all. North Dakota said it does not dictate terms to carriers (although the state did not allow carriers to re-submit rates for the 2018 plan year after the administration halted the CSR payments in October). Wyoming said it did not issue guidance to carriers on CSRs “because that’s not how we roll.” Missouri did not require its insurers to file 2017 rates with regulators, so it would have no way of knowing those insurers’ assumptions.

Other states admitted that they did not consider the possibility that the incoming administration would, or even could, terminate the CSR payments. North Carolina said it did not think the court case was relevant, or that cost-sharing reduction payments would be an issue. Massachusetts’ insurance Connector (its state-run exchange) responded that “there was no indication that rates for 2017 were affected by the pendency of House v. Burwell,” the case Collyer ruled on in May 2016.

Despite the ongoing court case and the deep partisan disputes over Obamacare, many commissioners’ responses indicate a failure to anticipate difficulties with cost-sharing reduction payments. Mississippi stated that, during the filing process for 2017, “CSRs weren’t a problem then, as they were being funded.” Minnesota added that “it was not until the spring of 2017 that carriers started discussing the threat [of CSR payments being terminated] was a real possibility.” Nebraska stated that “I don’t think that there’s anyone who allowed for the possibility of non-payment of CSRs for plan year 2017. We were all waiting for Congress to act.”

However, as an e-mail sent by the National Association of Insurance Commissioners (NAIC) to state regulators demonstrates, federal authorities at the Centers for Medicare and Medicaid Services (CMS) stated their “serious concerns” with the Texas and New Mexico proposals. Federal law requires insurers to reduce cost-sharing for qualifying beneficiaries, regardless of the status of the reimbursement program, and CMS believed the contingency language—which never went into effect in either Texas or New Mexico—violated that requirement.

In at least one case, an insurer raised premiums to reflect the risk that CSR payments could disappear in 2017. Blue Cross Blue Shield of Montana submitted such request to that state’s insurance authorities. However, regulators rejected “contingent CSR language”—apparently an attempt to cancel the reduced cost-sharing if reimbursement from Washington was not forthcoming, a la the Texas and New Mexico proposals. The insurance commissioner’s office also objected to the carrier’s attempt to raise premiums over the issue: “We will not allow rates to be increased based on speculation about outcomes of litigation.”

Of course, had insurers requested, or had regulators either approved or demanded, premium increases last year due to uncertainty over cost-sharing reduction payments, they would not now face the prospect of over $1 billion in losses due to non-payment of CSRs for the last three months of 2017. But had regulators approved even higher premium increases last year, those increases likely would have caused political controversy during the November elections.

As it was, news of the average 25 percent premium increase for 2017 gave Trump a political cudgel to attack Clinton in the waning days of the campaign. One can certainly question why Democratic insurance commissioners who did not utter a word about premium increases and CSR “uncertainty” during Clinton’s campaign suddenly discovered the term the minute Trump was elected president.

However, at least some ardent Obamacare supporters just did not anticipate a new administration withdrawing cost-sharing reduction payments. Washington state’s commissioner, Mike Kreidler, published an op-ed last October regarding the House v. Burwell court case. He did so at the behest of NAIC consumer representative Tim Jost, who wanted to cite Kreidler’s piece in an amicus curiae brief during the case’s appeal. But despite their focus on the court case regarding CSRs, it appears neither Jost nor Kreidler ever contemplated a new administration withdrawing the payments in 2017.

Congressional Oversight Needed

The evidence suggests that not a single insurance commissioner considered the impact of a new administration withdrawing cost-sharing reduction payments in 2017, a series of decisions that put the entire health of the individual insurance market at risk. What policy implications follow from this conclusion?

First, it undercuts the effectiveness of Obamacare’s “rate review” process. That mechanism requires states to evaluate “excessive” premium increases. However, the program’s evaluation criteria do not explicitly include policy judgments such as those surrounding CSRs. Moreover, the political focus on lowering “excessively” high premium increases might result in cases where regulators approve premium rates set inappropriately low—as happened in 2017, where no carriers priced in a contingency margin for the termination of CSR payments, yet those payments ceased in October.

As noted above, Montana’s regulators called out that state’s Blue Cross Blue Shield affiliate for proposing a rate increase relating to CSR uncertainty. The state’s insurance commissioner, Monica Lindeen, issued a formal “letter of deficiency” in which she stated that “raising rates on the basis of this assumption [i.e., loss of cost-sharing reduction payments] is unreasonable.” But events proved Lindeen wrong—those payments did disappear in 2017. Yet the insurer in question has no recourse after their assumptions proved more accurate than Lindeen’s—nor, for that matter, will Lindeen face any consequences for the “unreasonable” assumptions she made.

Second, it suggests an inherent tension between state authorities and Washington. Several regulators specifically said they looked to CMS’ advice on the cost-sharing reduction issue. Iowa requested guidance from Washington, and Wisconsin said the status of the payments was “out of our hands.” But given the impending change of administrations, any guidance CMS provided in the spring or summer of 2016 was guaranteed to remain valid only through January 20, 2017—a problem for regulators setting rates for the 2017 plan year.

Obamacare created a new layer of federal oversight—and federal policy—surrounding regulation of insurance, which heretofore had laid primarily within the province of the states. The CSR debacle resulted from the conflict between those two layers. Unless and until our laws reconcile those tensions—in conservatives’ case, by repealing the Obamacare regime and returning regulation to the states, or in liberals’ preferred outcome, by centralizing more regulatory authority in Washington—these conflicts could well recur.

Third, and perhaps most importantly, it should spark Congress to examine state oversight of health insurance in greater detail. The fact that insurance commissioners escaped the equivalent of a Category 5 hurricane—the withdrawal of CSR payments in January—and struggled through a mere tropical storm with payments withdrawn in October instead, had no relevance on their regulatory skill—to the contrary, in fact.

Unfortunately, Congress has demonstrated little interest in examining why the regulatory apparatus fell so short. The same Democratic Party that investigated regulators and bankers following the financial crisis has shown little interest in questioning why insurers and insurance regulators failed to anticipate the end of cost-sharing reduction payments. With their focus on getting Congress to appropriate funds restoring the CSR payments President Trump terminated, insurance commissioners’ lack of planning and preparation represents an inconvenient truth that Democrats would rather ignore.

Likewise, Republicans who wish to appropriate funds for the cost-sharing reduction payments have no interest in examining the roots of the CSR debacle. In September, Sen. Lamar Alexander (R-TN) convened a hearing of the Health, Education, Labor, and Pensions (HELP) Committee to take testimony from insurance commissioners on “stabilizing” insurance markets.

At the hearing, Alexander did not ask the commissioners why they did not predict the “uncertainty” surrounding cost-sharing reductions last year. HELP Committee Ranking Member Patty Murray (D-WA) asked Kreidler, her state’s insurance commissioner, about regulators’ “guessing games” regarding the status of CSRs with regard to the 2018 plan year. But neither she nor any of the members asked why those regulators made such blind and ultimately incorrect assumptions last year, by not even considering a scenario where CSR payments disappeared during the 2017 plan year.

Alexander and Murray claim the legislation they developed following the hearing, which would appropriate CSR funds for two years, does not represent a “bailout” for the insurance industry. But the fact remains that last fall, when preparing for the 2017 plan year, insurance regulators dropped the ball in a big way.

Ignoring their inaction, and appropriating funds for cost-sharing reductions without scrutinizing their conduct, would effectively bail out insurance commissioners’ own collective negligence. Congress should think twice before doing so, because next time, a regulatory debacle could have an even bigger impact on the health insurance industry—and on federal taxpayers.

This post was originally published at The Federalist.

There He Goes Again: Lamar Alexander Misrepresents His Obamacare Bailout

As Ronald Reagan might say, “There you go again.” Last week, Sen. Lamar Alexander (R-TN) published an op-ed in the Washington Examiner making claims about the Obamacare “stabilization” bill he developed with Sen. Patty Murray (D-WA).

The article tells a nice story about how conservatives should support the bill, but alas, one can consider it just that: A story. The article includes several material omissions and outright false statements about the legislation and its impact. Below are the facts and full context that Alexander wouldn’t dare admit about his bill.

Fact: In reality, the Congressional Budget Office in its score of the Alexander-Murray bill said the exact opposite:

Simply comparing outcomes with and without funding for CSRs [cost-sharing reduction payments], CBO and [the Joint Committee on Taxation] expect that federal costs in 2018 would be higher with funding for CSRs because premiums for 2018 have already been finalized and rebates related to CSRs would be less than the CSR payments themselves. [Emphasis mine.]

Insurers have already finalized their premiums for 2018 (in most states, open enrollment ends this Friday, December 15), and when doing so assumed cost-sharing reductions would not be paid. If Congress now turns around and appropriates those payments for 2018, insurers would have the possibility to “double-dip.” That means getting paid twice by the federal government to provide lower cost-sharing to low-income individuals.

While CBO believes insurers will return some of the “extra” subsidies they receive to the federal government—$3.1 billion worth, according to their estimate—they also believe that insurers will keep some portion of the excess, as much as $4-6 billion worth. That dynamic explains why CBO believes federal spending will increase, not decrease, as Alexander claims, if Congress appropriates cost-sharing reduction payments for 2018.

Fact: The $194 billion figure has no bearing to the Alexander-Murray legislation. Elsewhere in the op-ed, Alexander admits his bill would include “two years of temporary cost-sharing reduction payments.” If these payments would be “temporary,” then why cite a purported savings figure for an entire decade? Is Alexander trying to elide the fact that he wants to continue both Obamacare and these taxpayer payments to insurance companies in perpetuity?

Claim: “This bill includes new waiver authority for states to come up with their ideas to reduce premiums.”

Fact: The bill includes precious little new waiver authority for states. On substance, it retains virtually all of the “guardrails” in Obamacare that make implementing conservative ideas—like consumer-driven health-care options that use health savings accounts—impossible in a state waiver. While the bill does provide for a faster process for the federal government to consider waiver applications, without changing the substance of what provisions states can waive, the bill would just result in conservative states getting their waivers rejected more quickly.

Fact: This provision appears nowhere in the Alexander-Murray measure. Instead, it comprises a separate bill, introduced by senators Susan Collins (R-ME) and Bill Nelson (D-FL). And that bill, as originally introduced, would appropriate not $10 billion in reinsurance funds, but “only” $4.5 billion.

Some conservatives may find it bad enough that, in addition to appropriating roughly $20-25 billion straight to insurance companies in the Alexander-Murray bill, Alexander now wants a second source of taxpayer funds to subsidize insurers. Moreover, by more than doubling the amount of reinsurance funds compared to the original Collins-Nelson bill, Alexander seems to be engaging in a bidding war with himself to determine the greatest amount of taxpayers’ money he can shovel insurers’ way.

Claim: “Almost all House Republicans have already voted for its provisions earlier this year.”

At this point readers may question why Alexander made such a series of incomplete, misleading, and outright false claims in his op-ed. One other tidbit might explain the article’s dissociation with the truth.

Fact: Since 2013, the largest contributor to Alexander’s re-election campaign and leadership PAC has been…Blue Cross Blue Shield.

This post was originally published at The Federalist.