Proposed Rule To Allow Extension Of Cancelled Health Insurance Policies Is Illegal, Eleven State Attorneys General Contend

The proposed rule that would allow insurance companies to continue offering cancelled health insurance plans that do not comply with the Patient Protection and Affordable Care Act’s (ACA) mandates is illegal under federal constitutional and statutory law, according to comments submitted by eleven state attorneys general (AG) to Department of Health and Human Services’ (HHS) Secretary Kathleen Sebelius. The group also contends that the regulations ignore concerns about the security of consumers’ private information throughout the enrollment process on the health insurance exchange.

Fix for cancelled plans. On Nov. 14, 2013, President Barack Obama announced that his Administration would allow insurance companies to continue offering cancelled plans that do not comply with the ACA’s mandates. According to the AG, this “fix” means that the HHS will not be enforcing some of ACA’s market reforms. The AG’s comments state that the Centers for Medicare and Medicaid Services (CMS) explained in a November 14 letter that under this transitional policy, “health insurance coverage in the individual or small group market that is renewed for a policy year starting between Jan. 1, 2014, and Oct. 1, 2014, … will not be considered to be out of compliance with the market reforms specified below under [two] conditions.” The CMS letter identifies eight statutory market reforms that CMS is purporting to suspend. It also sets forth two conditions that must be satisfied for the alleged suspensions to apply: (1) that the coverage was in effect on Oct. 1, 2013; and (2) that the health insurance issuer sends a notice with certain information, including notification of the specific market reforms that would not be available under the continued plan.

Fix is unlawful. The AG contends that the fix is unlawful because it is a violation of the Obama’s responsibility to “take care” to execute the laws faithfully. In addition, the fix unlawfully creates either a new statutory obligation in violation of the separation of powers or a new rule in violation of the Administrative Procedure Act.

Although Obama has argued that his administrative fix is a lawful exercise of enforcement discretion, the AG argues that Obama’s actions go beyond the discretion provided under the Supreme Court’s precedents. “As the Supreme Court stated long ago, ‘[to] contend that the obligation imposed on the president to see the laws faithfully executed implies a power to forbid their execution is a novel construction of the Constitution, and is entirely inadmissible,’” the AG wrote in its comments.

In addition, the AG contends that CMS’s imposition of a new disclosure requirement on insurers is either an unlawful new law or agency rule. The disclosure requirement does not appear in the United States Code, and it did not go through the Constitutional procedures necessary to create a new law. Thus, it cannot be enforced as a duly enacted statute.

If CMS argues that the requirement is a rule rather than a law, the AG argues that it is unlawful because it failed to comply with the Administrative Procedures Act (APA). The notice-and-comment procedures in the APA were not followed with respect to the new disclosure requirement.

Tighten security standards. The AG also recommends that HHS tighten security standards for consumers’ personal data needed for enrollment in the exchanges. They suggest that HHS:

• mandate rigorous background checks on all persons with access to private consumer information;

• subject personnel in navigator and other assistance programs to the same safeguards on consumers’ private information as other federal employees who access sensitive consumer information;

• mandate rigorous training requirements and accountability for all programs;

• explain what it intends to do to help defrauded consumers or consumers whose personal information is or was improperly shared; and

• consider working in partnership with state consumer protection efforts.

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