In Start To Unwinding The Health Law, Trump To Ease Insurance Rules

The unlikely state of Idaho just opened the latest front in the endless war against health reform. At the end of January, it announced that it will allow insurers to sell plans without regard to Obamacare’s pesky rules.

So far as Idaho is concerned, insurers are free to charge the sick more for coverage, to limit their benefits, and to impose annual payout caps. Last week, Blue Cross of Idaho said it hopes to start selling noncompliant plans by early March.

Given that the Affordable Care Act is still the law of the land, what’s going on here? It’s tempting to dismiss Idaho’s move as an inconsequential political stunt. The state has a population the size of Phoenix and went for Donald Trump over Hillary Clinton by more than 30 points. A committee in its House of Representatives just approved a bill to allow state lawmakers to nullify federal law — a nonstarter, constitutionally. So what if Idaho wants to fly its crazy flag?

But it would be a mistake to ignore what Idaho is up to. If the Trump administration doesn’t intervene, other red states will surely follow in its footsteps. The result will be widespread disregard of the law and the rise of state-to-state inequalities in the private market similar to those that already exist in Medicaid.

And don’t count on the courts: They’re more likely than you might think to sit this one out. Idaho could help red states achieve what congressional Republicans have only dreamed of: the covert repeal of some of the ACA’s most crucial protections. As Idaho goes, so goes the nation.

Yes, what Idaho is doing is illegal. It’s not even close.

What’s worrisome about Idaho, legally speaking, is not that it won’t enforce the Affordable Care Act. Under the Constitution, the federal government can’t direct state officials to enforce federal law. That’s why the ACA has a backup. When the states fail to “substantially enforce” the law, the Department of Health and Human Services is supposed to enforce it for them. The agency has already done so in four states that want no part of Obamacare: Missouri, Oklahoma, Texas, and Wyoming.

Instead, what’s worrisome is that Blue Cross of Idaho intends to disregard its own obligation to comply with federal law. The ACA prohibits all insurers in the United States from discriminating against the sick and imposing annual caps, and states have no power to undo those prohibitions. So Blue Cross knows full well that it will be breaking the law if it takes up Idaho’s invitation. It just thinks it’ll get away with it.

Unfortunately, Blue Cross might be right. There’s some bad precedent on the books. When President Obama came under fire for breaking his promise that “if you like your health plan, you can keep it,” his administration told states that they could allow insurers to sell “grandmothered” plans that violated ACA rules. That too was illegal, as I said at the time. But the Obama administration went ahead anyhow, which may have made it easier for the Trump administration to turn a blind eye to what Idaho is doing.

If Idaho moves forward and other states follow its lead, what will emerge is a gray market in noncompliant insurance coverage, not unlike the gray market in legalized marijuana. Indeed, the marijuana analogy fits neatly. In both cases, state officials have purported to legalize conduct banned by federal law; in both cases, federal officials have been reluctant to enforce a law they disagree with.

And as with marijuana, what starts in one state will spread. As floutings of federal law go, Idaho’s approach is pretty measured. Under its rules, insurers that sell noncompliant plans must also sell compliant plans, the unhealthy can “only” be charged 50 percent more than the healthy, and insurers must cover preexisting conditions (unless there’s a gap in coverage, in which case they don’t).

But other red states that follow Idaho’s lead may not be so restrained. They might allow insurers to ditch their ACA-compliant plans, to exclude any and all preexisting conditions, or to jettison coverage for mental health care. Red states could take us back to the harsh pre-ACA state of affairs, and all without the need for congressional action.

So this story isn’t really about Idaho. It’s about every Republican-controlled state that’s waiting to see what happens next.

The courts might intervene. Then again, they might not!

Bringing a lawsuit to end the Idaho experiment won’t be easy. Figuring out whom to sue and finding the right plaintiff both pose challenges. Suing HHS is probably a nonstarter. The Supreme Court has flatly held that the courts can’t review a federal agency’s refusal to enforce the law. There’s some wiggle room where an agency adopts a policy that’s “so extreme as to amount to an abdication of its statutory responsibilities,” but the case would be a long shot.

A better approach would be to sue the Idaho Department of Insurance when it greenlights Blue Cross to sell noncompliant plans. Even though Idaho doesn’t have to enforce the ACA, state law requires state agencies to follow federal law when they make decisions. And approving an illegal plan for sale is unquestionably an action “in violation of constitutional or statutory provisions.”

To bring that case, however, you’d have to find a plaintiff with standing, which means a plaintiff who has suffered injury on account of the department’s decision. Who might that litigant be?

It’s tricky. Noncompliant plans will appeal to healthier people, leaving sicker people to buy ACA-compliant health plans. The price for compliant plans will go up — but not everyone will pay that price, because the ACA caps the premiums of people who earn less than four times the poverty level. Rising premiums won’t injure people who are protected by premium caps, so they probably won’t have standing.

The best plaintiff, then, might be someone who earns too much to take advantage of the premium caps but who has a chronic condition. She couldn’t afford to buy a noncompliant Blue Cross plan: Blue Cross would jack up her premiums because she’s sick. And next year her premiums for an ACA-compliant plan will shoot up because healthy people will flee the market for compliant plans. She’ll face a classic pocketbook injury, and therefore might have grounds to sue.

Even then, however, standing isn’t a sure thing. The link between the insurance department’s action and the resulting price increase might be too attenuated to satisfy the courts. The doctrine around standing is notoriously unpredictable and, in the hands of unsympathetic judges, could pose a serious obstacle. (We can be pretty sure that Idaho judges will be unsympathetic: The state elects its judges, and the electorate dislikes the law.)

Nor is standing the only problem. Under Idaho law, a plaintiff must ask an agency for relief before suing it. If the courts force a plaintiff to exhaust her administrative remedies before hearing her case, it could be stalled long enough for other states to head down the same road.

Another option: going after Blue Cross

Another approach would be to sue Blue Cross itself. Its new “freedom plans” would cap annual payouts at $1 million per year. A patient who busts through that cap could sue the insurer to force it to cover all of her medical expenses. The ACA forbids such caps, and in Idaho, as in other states, “[t]he general rule is that a contract prohibited by law is illegal and unenforceable.” It should be a slam-dunk case.

A lawsuit like that, however, might have to wait until Blue Cross enforces the annual cap against someone, which could take time. Until then, it’s hard to see what the basis for a suit against Blue Cross would be. It’s crappy to charge the sick more for coverage, but it’s not the sort of public nuisance that the courts will abate.

I don’t mean to be too skeptical: These are early days, and inventive lawyers may come up with inventive strategies to stop the Idaho initiative. But it’s by no means a given that a lawsuit will ever get off the ground, either in Idaho or in the inevitable copycat states.

The ball is in the Trump administration’s court. Will it enforce the law?

Whether red states can roll back Obamacare may therefore hinge on whether the newly installed HHS secretary, Alex Azar, decides to block Idaho’s plans. Doing so wouldn’t be hard. Azar could simply determine that Idaho wasn’t enforcing the law and threaten to sanction Idaho Blue Cross. (The maximum penalty is $100 a day per enrollee, more than enough to make the plans unmarketable.) Blue Cross would undoubtedly fold.

That’s where the analogy to marijuana laws breaks down. The Department of Justice really can’t bring cases against all violators of the drug laws; it has to pick and choose how to marshal its scarce resources. HHS doesn’t face the same constraints when it comes to enforcing key ACA provisions. A single letter to Blue Cross would do the trick.

Given the ease of enforcement, refusing to enforce would represent an especially clear violation of the president’s duty to “take care” that the laws are faithfully executed. At a recent congressional hearing, Azar seemed to admit as much: “There is a rule of law that we need to enforce.”

Will the HHS head match his rhetoric with action? If not, the Affordable Care Act is in jeopardy. Idaho could be blazing a trail for Republican-controlled states to follow, bringing us back to a time when some of the sickest among us couldn’t get health insurance — at any price.

Nicholas Bagley is a professor at the University of Michigan Law School and a contributor to >

The Incidental Economist

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The Big Idea is Vox’s home for smart discussion of the most important issues and ideas in politics, science, and culture — typically by outside contributors. If you have an idea for a piece, pitch us at [email protected].

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