New Precedent Allows Congress to Dismantle (Some of) Obamacare

What does a ruling about automobile financing have to do with Obamacare? As it turns out, plenty.

This week the Senate acted to repeal a piece of regulatory guidance the Consumer Financial Protection Bureau (CFPB) issued back in March 2013. As a Politico report Wednesday noted, that precedent allows Congress to nullify other regulatory actions the federal government took years ago—including those on Obamacare.

1996 Law Allows for Expedited Process

Until this week, Congress has generally enacted CRA resolutions of disapproval following a change in administration, when one party controlled both houses of Congress and the presidency. In 2001, Republicans passed, and President George W. Bush signed, a resolution of disapproval negating an ergonomics rule promulgated in the waning days of the Clinton administration. Last year, the Republican Congress passed and President Trump signed 14 resolutions of disapproval undoing Obama administration actions.

Action on CRA resolutions of disapproval undoing Obama administration actions had largely ended last year. The CRA provides that Congress can consider resolutions of disapproval under expedited procedures only within 60 legislative days of the rule’s “submission or publication date.” Because the Obama administration’s final regulatory actions occurred early in 2017, the 60 legislative-day clock ran out last year—or so it appeared.

However, as the Heritage Foundation’s Paul Larkin has argued for many years, the CRA contains a big catch. According to the law, the expedited procedures apply for the 60 legislative days following “the later of the date on which” Congress receives a required report on the regulatory action, or the action is published in the Federal Register. If an administration never officially submitted a report to Congress, the 60 legislative-day clock never began, and the current Congress can still pass a resolution of disapproval under the CRA-expedited procedures.

Because the Obama administration did not consider the CFPB document a “rule,” it never submitted it to Congress, as required by the CRA. The 60 legislative-day clock never expired, because the Obama administration never started it by submitting the document to Congress. That meant the Senate could, and did, pass a resolution of disapproval negating the CFPB guidance this week, more than five years after CFPB first issued it.

Now Congress can do the same thing regarding Obamacare.

This Opens Lots of Doors for Obamacare Regs

To be sure, Congress cannot pass resolutions of disapproval regarding Obamacare rules that the Obama administration officially submitted years ago, which is most of them. But in some cases, the last administration may not have formally submitted sub-regulatory guidance, giving Congress an opening to repeal at least part of Obamacare’s regulatory structure.

I wrote early last year that the Trump administration should unilaterally revoke that guidance, but unfortunately, it has not done so yet. However, if the Obama administration never submitted that guidance to Congress, then Congress—using the precedent set this week—can pass a resolution of disapproval negating it. Alternatively, Congress can consider starting action on a resolution of disapproval, to get the Trump administration off the proverbial dime in revoking the guidance themselves.

The CRA precedent set this week also serves as a cautionary tale for the Trump administration, a warning to act thoroughly with its own regulatory actions. For instance, the guidance to state Medicaid programs issued earlier this year regarding work requirements likely meets the definition of a “rule” for CRA purposes. If the Trump administration never submits that action to Congress, a future Democratic administration and Democratic Congress could—and if given the chance, certainly would—act to undo the guidance, and thus the Medicaid work requirements.

But even as the Trump administration should act to cement its own regulatory legacy, Congress can act to negate portions of Obamacare through resolutions of disapproval. I know from experience that staff in Congress, and during the transition, compiled lists of rules that they can use CRA to target. During my time on Capitol Hill following Obamacare’s passage, staff kept a spreadsheet containing all the rules and notices the law generated—the source of the “Red Tape Tower” that used to appear around the Capitol.

This post was originally published at The Federalist.

Health Insurance Bailout Is Subprime Redux

Stop me if you’ve heard this story before: Financial institutions, enabled and empowered by lax regulators, make unwise multi-billion-dollar bets that threaten the well-being of millions of Americans—not to mention federal taxpayers. The subprime mortgage crisis that led to the financial meltdown of 2007-08? Sure. But it also describes insurers’ risky bets on Obamacare in 2017-18.

At issue in the latter: Federal cost-sharing reduction payments, designed to reimburse insurers for providing discounted co-payments, deductibles, and the like for certain low-income households. While the text of Obamacare includes no explicit appropriation for the payments, the Obama administration decided to start providing the payments to insurers anyway when the law’s insurance exchanges opened in 2014.

By summer 2016, anyone could have seen problems on the horizon for insurers: Collyer had declared the cost-sharing payments unconstitutional; a new president would take office in January 2017, and could easily terminate the payments unilaterally, just as Obama started them unilaterally; and neither Hillary Clinton nor Donald Trump made any clear public statements confirming the payments would continue.

Worried about their potential exposure, insurers tried to fix their dilemma, but didn’t. Insurers insisted upon language in their contracts with healthcare.gov, the federally run insurance exchange, stipulating that cost-sharing reductions “will always be available to qualifying enrollees,” and allowing them to drop out of the exchange if those reductions disappeared.

But the legal and constitutional dispute does not apply to payments to enrollees. Insurers are legally bound to provide those reductions regardless. The contract provides no help to insurers on the fundamental question: Whether the federal government will reimburse them for providing individuals the reduced cost-sharing.

Likewise, despite having multiple reasons to do so, state regulators did not appear to question the uncertain status of the cost-sharing payments when approving insurers’ 2017 rates in the fall of 2016. I asked all 50 state insurance commissioners for internal documents analyzing the impact of the May 2016 court ruling declaring the payments unconstitutional on the 2017 plan year. In response, I have yet to receive a single document to indicate that regulators demonstrated concern about the incoming administration cutting off billions of dollars in federal subsidies to insurers.

Having under-reacted surrounding the cost-sharing reductions for much of 2016, insurers and insurance commissioners have spent the past several months over-reacting. Industry lobbyists have swarmed Capitol Hill demanding Congress pass an explicit appropriation for the payments—and more bailout payments besides.

But the hyperventilation regarding the cost-sharing payments sends the wrong message to financial markets: They can ignore significant risks, so long as their competitors do so as well. The “uncertainty” surrounding the payments was knowable, and known, both to insurers who tried to change their contracts with the federal exchange, and to analysts like this one. Yet insurers did not change their behavior to reflect those risks, nor did regulators require them to do so.

This post was originally published at The Federalist.