Column: Trump administration nixes Idaho’s plan to sell junk health insurance to the masses — but wants to substitute its own plan

The Trump administration proactively enforcing the Affordable Care Act may have the flavor of a “man bites dog” story, but on Thursday it actually did so. Medicare Administrator Seema Verma flatly rejected Idaho’s plan to allow insurers in the state to scrap the ACA’s consumer protection rules.

The ACA, Verma said in a letter to Idaho Gov. Butch Otter, “remains the law and we have a duty to enforce and uphold the law.” That put the kibosh on a plan by Blue Cross of Idaho to sell five “state-based” insurance policies that flouted the ACA.

The policies followed a state law allowing insurers to raise rates or even reject applicants with preexisting conditions, to impose annual benefit caps, and omit several benefits mandated under the ACA, including pediatric and maternity care, and incorporate separate out-of-pocket limits for prescription drugs.

Verma, whose job as administrator of the Center for Medicare and Medicaid Services includes supervising compliance with the ACA, noted that states have the nominal responsibility for ACA enforcement, but that if a state is judged not to be “substantially enforcing” the law, her office has the duty to step in and enforce it instead.

“We have reason to believe that Idaho may not be substantially enforcing provisions of the PPACA,” she told Otter. (The PPACA is the Patient Protection and Affordable Care Act, the full, formal name for Obamacare or the ACA.) She also noted that the law gives her the authority for enforcement against insurance companies that attempt to sell policies violating the ACA. That was a shot across the bow of Blue Cross of Idaho.

Verma acknowledged that Idaho’s Obamacare marketplace isn’t working as well as it could, though she left out one likely reason: The state hasn’t accepted Medicaid expansion, which would cover tens of thousands of otherwise uninsured residents.

Verma didn’t entirely rule out plans such as Idaho’s, unfortunately. She advised Otter that some of the plans proposed by Blue Cross might fit within President Trump’s carve-out for “short-term” health plans. These are bare-bones insurance plans that were limited under the Obama administration to three-month terms, but that Trump has proposed extending for terms of up to a year.

“We believe that, with certain modifications, these state-based plans could be legally offered” as short-term plans,” she wrote. She invited Idaho officials to meet with her office to work out an accommodation.

That drew an almost instantaneous reaction from Sen. Ron Wyden (D-Ore.), the top Democrat on the Senate Finance Committee. “The Trump administration is talking out of both sides of their mouth,” he said. “While they claim to be upholding the law, they are explicitly inviting Idaho and other states to sell short-term, junk insurance — the exact opposite of the protections put in place by the Affordable Care Act.”

Idaho’s action, which was embodied in a Jan. 5 executive order by Otter, placed Trump’s new secretary of Health and Human Services, Alex Azar, in a delicate position. Asked at his confirmation hearing last month how he would respond to the initiative, he said only, “There are rules, and there’s a rule of law that we need to enforce.”

But health insurance experts overwhelmingly regarded the “state-based” plans as flagrant violations of the ACA. “Idaho’s approach is not acceptable,” health law expert Timothy S. Jost observed a few days before Blue Cross unveiled its proposed plans. “There are already signs that other states may follow suit. Congress failed to repeal the ACA. Individual states certainly cannot repeal it on their own.”

Indeed, just this week Iowa legislators moved to strip some of the ACA’s customer protections from plans sold in that state.

As recently as Feb. 22, the law firm for Blue Cross of Idaho tried to convince Azar that the Idaho rules qualified as “substantial enforcement” of the ACA, and thus were permissible. We checked with our legal experts to see if its rationale holds water. The short answer was: No.

“By no measure is Idaho’s nonenforcement ‘insubstantial,’” Nicholas Bagley of the University of Michigan told us by email. “This isn’t a case in which Idaho is excusing some technical deficiencies. Among other things, Idaho purports to license Blue Cross to discriminate on the basis of health status [that is, to charge customers with medical conditions higher rates]. A more flagrant, categorical violation of the law is hard to imagine.”

Bagley also noted that Blue Cross had an obligation to comply with the ACA no matter which government body was enforcing it, including the federal government. “Idaho’s director of the Department of Insurance can’t waive that federal obligation.”

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