The Incidental Economist

The latest delay of the like it/keep it fix has again provoked critics of the Affordable Care Act to pillory the Obama administration for bending the law past the breaking point. Bracket for the moment whether the delay will have much of an impact (no, says Adrianna) or whether it’s sensible policy (yes, says Jon Cohn). I want to explore two legal questions. Is the administration’s action unlawful? If so, why might that matter?

As the administration sees it, the fix is just an exercise of its traditional discretion to decide how, when, and whether to enforce the law against particular offenders. I’m on record raising serious doubts about that justification. The President does have discretion not to enforce the law in discrete cases, but that discretion is limited by the President’s constitutional duty to “take Care that the Laws be faithfully executed.”

As Zach Price has recently shown, the President exceeds the scope of his enforcement discretion when he publicly commits not to enforce a congressional statute against a large category of offenders. The like it/keep it fix would seem to fit the bill. In practice, the fix invites insurers to violate a statute that prohibits them from continuing to sell non-compliant plans. The “take Care” duty has not traditionally been understood to countenance that sort of thing.

Why might this matter? It’s not because the like it/keep it fix will be challenged in court. No insurers challenged the first fix, although some probably had standing to do so. I doubt anyone will challenge the second fix either.

Nor is the administration likely to pay much of a political price for skirting the law. Sure, the fix will reinforce the storyline that an overweening administration is forcing an ill-conceived law down a resistant public’s throat. But most of the damage on that front has already been done. In any event, the administration is probably right that it’s better to have one bad headline than a round of cancellation notices during the midterms.

The lack of a persuasive legal justification matters most not for the current political battles, but for the future. Because the Constitution doesn’t crisply detail what the “take Care” clause means, the phrase accrues meaning through practice. The Obama administration’s repeated delays of the ACA now stand as precedent for future administrations that would also like to postpone statutes. The more the administration delays the ACA, the firmer that precedent becomes.

There’s a risk, then, that the delays will transfer to the executive branch considerable power to refashion statutes. That could spell trouble for health-care reform down the line. What if a future president were to postpone portions of the law that were essential to the law’s ongoing success? Or provisions that protected consumers from sharp insurance practices? The recent delays might give him legal cover to do so.

The worry isn’t confined to health care. The ACA delays stand as potential support for postponing the effective date of any law, whether it’s a tax-reform statute, a new immigration law, or climate-change legislation. But that freewheeling authority to delay substantive law would mark a dramatic shift in the allocation of lawmaking power in our constitutional structure.

Don’t get me wrong: I have a lot of sympathy for the political bind that the Obama administration is in. Republican antipathy to health-care reform has put extraordinary pressure on the administration to go it alone. Nonetheless, it’s important to acknowledge, as Jack Balkin has, that “[n]ew exertions of executive power crafted to deal with a dysfunctional Congress may serve as justifications for future Presidents to act unilaterally later on.” Going it alone may be expedient, but it’s risky.

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The following is a guest post by Nicholas Bagley, University of Michigan Assistant Professor of Law.

Last week, the House Judiciary Committee held a hearing to investigate whether President Obama has violated his constitutional duty to enforce the laws. The hearings focused in part on the legality of the administrative fix to the “like it/keep it” problem. Per the fix, state insurance commissioners were told they could wait for a year to enforce a raft of new insurance rules contained in the Affordable Care Act.

As I’ve explained before, the administrative fix is probably unlawful. At the hearing, however, Simon Lazarus of the Constitutional Accountability Center offered a staunch defense. His claim—which has also cropped up elsewhere—is rooted in the Administrative Procedure Act, which allows courts to “compel agency action” that is “unreasonably delayed.” Over at the New Republic, Jeffrey Rosen explains:

[A]s Lazarus argued, the [unreasonable-delay provision] …  isn’t an inflexible command: Courts have long made clear that the statutory deadline is one factor to consider in evaluating whether a delay is unreasonable. Moreover, Lazarus argued, the mere fact that the Administrative Procedure Act allows courts to force dithering agencies to implement regulations only in rare cases suggests that Congress has long intended to give agencies broad discretion about when to implement the regulations in the first place.

I think this is wrong. It’s worth explaining why.

“Unreasonable delay” cases typically arise when a statute commands an agency to act and the agency hasn’t yet done so. This kind of thing happens all the time. When it does, the APA lets a litigant come to court and say, “Hey, agency, the statute says you have to act and you haven’t yet. Get on it.” Lazarus is right that the courts tend to defer to agencies that dawdle.

But the “unreasonable delay” cases have nothing to say about the administrative fix. No one is complaining that HHS has failed to act. The complaint is that HHS acted when it shouldn’t have. The administrative fix is itself an agency action that could be challenged as contrary to law.

Conceptually, it’s tempting to put an agency policy that promises to withhold enforcement into the “agency inaction” box. That’s not, however, how the courts think about the problem. If they did, then all of the cases challenging enforcement policies would be treated as cases about “unreasonable delay.” But they’re not. Instead, they’re treated as straight-up challenges to the policies themselves.

In short, I still think the administrative fix is legally vulnerable. To my knowledge, no insurer has sought to challenge it in court (although some insurers probably have standing to do so). If litigation does erupt over the fix, I sure hope the administration can come up with a better argument than I’ve seen so far.

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From Kaiser Health News:

Officials in at least a half dozen states are pushing back against health plans in the new insurance markets that limit choice of doctors and hospitals in a bid to control medical costs.

The plans don’t start offering coverage until January but they’re facing regulatory action, possible legislation, and in at least one case involving a high-profile children’s hospital, litigation.

The pushback against “narrow” provider networks recalls the backlash against managed care and health maintenance organizations  in the 1990s. Protests from consumers and hospitals eroded those attempts to restrain expenses by narrowing provider networks.

Now criticism of limited networks has risen as consumers realize that, despite President Barack Obama’s pledge that they could keep their doctors, their Affordable Care Act insurance may not include the physicians or hospitals they’ve been seeing.

I’m seriously amazed people are amazed by this. Narrow networks are not new. Networks are not new. I’ve never had a plan that didn’t differentiate between “in network” and “out of network”. I imagine the only plans that don’t have such networks are… government plans.

Has no one heard of an HMO? Seriously?

Do you know why such plans exist? Cause they’re cheaper:

Broader choice comes with a price. The ability to sell less-expensive plans with limited choices of doctors and hospitals helps contain medical inflation, health economists argue. Looser networks could. mean higher prices.

Is this really news?!?!?!

@aaronecarroll

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The following is a guest post by Nicholas Bagley, University of Michigan Assistant Professor of Law.

I argued yesterday that President Obama’s effort to make good on his like it/keep it commitment doesn’t look especially legal. If I’m right about that, here’s a question: would anyone have standing to challenge the administrative fix?

I think so. Generally speaking, a litigant has standing if three conditions are met: (1) the litigant has suffered (or is about to suffer) a concrete, particularized injury; (2) the challenged government action caused the injury; and (3) a favorable outcome in litigation would at least partly redress the injury.

In states that will allow old policies to be renewed—they include Florida, Ohio, and Texas—insurers could probably satisfy these conditions. Prior to the fix, insurers priced their exchange plans on the assumption that nearly everyone on the individual market would move to the exchanges. Now, however, the people who renew their old policies won’t be in the exchanges. Since those people tend to be relatively young and healthy, it’ll cost more than anticipated to cover the sicker and unhealthier exchange population. Greater medical outlays mean a dip in earnings for insurers. That’s an imminent injury. The injury, should it come to pass, was caused by the fix. And invalidating the fix would eliminate the injury. That’s the ballgame.

Or maybe not. The argument in favor of insurer standing isn’t open and shut. A litigant doesn’t have standing where the chain of causation between the challenged action and the private injury is too attenuated. In particular, the Supreme Court has rejected claims of standing where the injury “results from the independent action of some third party not before the court.” That’s arguably the case here. The most immediate cause of an insurer’s injury isn’t the administrative fix. It’s the collective choices of other insurers to renew their plans and of consumers to repurchase them.

Insurers and consumers may not make those choices. After all, it’s possible that only a trivial number of insurers will renew canceled plans. Many won’t have time to clear their now-canceled plans with state insurance commissioners. Some won’t want to cannibalize their own exchange plans by renewing the plans they used to offer. And others could be discouraged by uncertainty about the enforceability of plan terms that clash with the ACA, a possibility that Jonathan Adler explored last week.

For their part, a lot of people who are now upset about their canceled coverage might not renew, even if given the chance. Some of them will inadvertently throw away the letters re-offering their canceled plans. Others who have already purchased exchange coverage may not want to go through the rigmarole of canceling it. Still others, as Jonathan Cohn has pointed out, will be pleasantly surprised to learn that they can afford better coverage than they had before.

Because the injury may therefore never materialize, it may be too speculative, and too loosely connected to the administrative fix, to support standing. Nonetheless, my sense of the case law is that these objections to standing aren’t terribly persuasive. The federal courts often uphold standing for litigants whose injuries are more speculative than the financial harm that some insurers now credibly face. And there’s zero doubt that, without the fix, no insurer would have been injured in quite this way. The causal link between the fix and the asserted injury is tighter here than in other cases where litigants were allowed to sue.

Standing doctrine is a notoriously slippery area of the law, so predictions are always a bit hazardous. But if an insurer does have standing, I don’t see any other technical impediments to a lawsuit. The administrative fix wasn’t announced in a formal rulemaking, but that shouldn’t matter. It’s still a final agency action of the kind that’s subject to review under the Administrative Procedure Act. And although it takes years for most litigation to wend its way through the courts, an insurer could ask a court to enter a preliminary injunction against the fix. That would speed things up.

Just because some insurers could sue, however, doesn’t mean that any will. As Adrianna has pointed out, some of the distress over skewed risk pools is overdrawn. Insurers may come to recognize as much. The administration has also said that it will think about making its risk-corridor rules more generous, which could ease insurers’ financial concerns. Apart from all this, insurers have plenty of incentives to play nice with the administration. It’s possible, then, that no one will bother to challenge the fix. We’ll have to see. But if an insurer does want to make a federal case out of this, I think it probably could.

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The following is a guest post by Nicholas Bagley, University of Michigan Assistant Professor of Law.

I speculated last week about the legal basis for the administrative fix that the president announced to deal with the “like it/keep it” fiasco. Since then, the administration has offered a new hint about its thinking. According to press accounts, it means to defend the fix—which delays application of the ACA to insurance plans currently sold on the individual market for one year—as an exercise of its enforcement discretion.

I’m not sure this rationale works. The administration’s claim rests on an expansive reading of Heckler v. Chaney, an important Supreme Court decision from 1985. In Heckler, the Court held that agencies have wide discretion to decide whether, when, and how to enforce the law. No agency, the Court explained, has enough resources to police every technical legal violation. Instead, agencies must set priorities based on a host of factors—the harm caused by the violation, the likelihood of prevailing, the need to conserve scarce resources, and the like. Courts shouldn’t second-guess how an agency weighs all those factors. Enforcement, in the legal jargon, is “committed to agency discretion by law.”

But just how far does the Heckler principle go? Although federal agencies have wide discretion to decline to prosecute, they can’t dispense with the law altogether. That would contravene the President’s constitutional duty to “take Care that the Laws be faithfully executed.” The difficulty is that there’s no crisp dividing line between non-enforcement of the law (which is OK) and ignoring the law (which is not). In principle, you could spin the like it/keep it fix either way. It’s both a decision not to enforce the law against a discrete set of plans and a decision to dispense with the law as to those plans.

The administration’s legal defense rests on the claim that the fix falls on the non-enforcement side of the ledger. Maybe. But I see four reasons to worry. First, it’s not the federal government’s job to enforce the ACA’s insurance rules. That’s up to the states. It’s hard to justify the administrative fix as an exercise of enforcement discretion when someone else is doing the enforcing. (The feds can step in if a state fails to “substantially enforce” the ACA. But the states were prepared to enforce the law, which is why insurers canceled their non-conforming plans in the first place.*)

Second, Heckler is mostly concerned with giving agencies the space to make “discretionary judgment[s] concerning the allocation of enforcement resources.” The administration’s decision to stop deporting DREAMers, for example, can be defended as that kind of judgment. With millions of people in violation of the immigration laws, it’s sensible to devote limited resources to deporting the worst offenders. Here, in contrast, the fix doesn’t really have anything to do with resource allocation. Wedging it into the Heckler rule may therefore be hard.

Third, Heckler’s general assumption that agencies have enforcement discretion can be rebutted where a statute constrains that discretion. Here, the ACA probably does. On Thursday, the president acknowledged that he was trying to “fix” the ACA’s grandfather clause, which, in his view, was drafted too narrowly. But doesn’t that clause stand as persuasive evidence that the plans that it covers are the only ones that Congress wanted to grandfather? Whatever the scope of its enforcement discretion, the administration probably can’t exercise that discretion to deliberately rewrite the statute.

Fourth, the D.C. Circuit has suggested that Heckler should be confined to “single-shot” decisions not to enforce against small, discrete sets of violators. In words that seem pertinent here, the court has said that “an agency’s pronouncement of a broad policy against enforcement poses special risks that it has consciously and expressly adopted a general policy that is so extreme as to amount to an abdication of its statutory responsibilities.” Distinguishing between single-shot decisions and broad policies isn’t as easy as you might think—even the agency choice at issue in Heckler wasn’t, strictly speaking, a single-shot decision. But the breadth of the fix is another strike against it.

In short, I’m uncomfortable with the “enforcement discretion” justification. Because I haven’t yet seen a complete legal defense, I remain open to persuasion. As it stands, however, the administrative fix looks awfully vulnerable to legal attack.

* Actually, it’s a little more complicated than that. Six states, including Texas, have said they won’t enforce the ACA’s new insurance rules. The federal government will have to enforce the law in those states. On the whole, however, the states remain primarily responsible for enforcing the ACA.

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The following is a guest post by Nicholas Bagley, University of Michigan Assistant Professor of Law. (By the way, Nick is now on Twitter. Follow him!)

President Obama announced today an administrative fix that would allow people in the individual market to keep canceled policies even if those policies don’t comply with the Affordable Care Act. A heated debate has already broken out over whether this makes for good policy. How badly will the renewal of canceled plans disrupt the insurance markets? Can state insurance commissioners move fast enough to approve the sale of previously canceled plans? Will this provoke insurance companies—they’re apparently furious—to turn on the administration?

I had another question. What’s the legal authority for the President to do this? As I wrote on Monday, the ACA require all plans sold on the individual market after January 1, 2014 to adhere to a new slate of rules. The administration now says that some of those plans don’t have to. What gives?

We haven’t seen a legal justification for the fix yet. What we do have, however, is a letter from CMS that characterizes the administrative fix as a “transitional policy.” That word—“transitional”—may remind you of an earlier administrative fix. When the Obama administration delayed the employer mandate, the delay was also billed as “transition relief.” The delay sparked immediate controversy, in part from lawyers who thought it demonstrated a disregard for the law.

As it turned out, the administration had a halfway-decent legal argument up its sleeve. The IRS, which administers the employer mandate, had developed over the years a bipartisan habit of affording time-limited transitional relief to ease compliance concerns that cropped up in connection with tax legislation. The administration could credibly point to that practice and say that Congress had acquiesced in the IRS’s broad view of the scope of its rulemaking authority. (I explained all this in greater detail here.)

The administration may intend to make the same kind of claim here: that CMS’s generic grant of rulemaking authority has long been understood to include the power to offer time-limited transition relief from regulatory obligations. It looks like there’s something to this. Nonprofit employers that objected on religious grounds to the contraceptive-coverage mandate, for example, were recently afforded a “transitional enforcement safe harbor” exempting them from that obligation. Similarly, CMS recently extended transition relief (without calling it that) to certain employer-sponsored plans when it gave them a one-year exemption from annual limitations on out-of-pocket maximums.

But here’s the thing. Generic grants of rulemaking authority are not traditionally thought to give agencies the power to revise the effective dates of statutes. That’s why the delay of the employer mandate was so controversial. Although the IRS’s practice was sufficiently well-entrenched that it gave the administration a reasonable legal basis for acting, I’m skeptical that CMS has developed a similarly well-entrenched practice. (The two examples above are of quite recent vintage.) I could be wrong about that; maybe CMS really does do this kind of thing all the time. But if I’m not, the administrative fix may be vulnerable to even sharper claims of illegality than the delay of the employer mandate.

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Jackie Calmes and Robert Pears in The New York Times:

The Obama administration on Friday will complete a generation-long effort to require insurers to cover care for mental health and addiction just like physical illnesses when it issues long-awaited regulations defining parity in benefits and treatment.

The mental health community has been working for this for decades. And now we will see what difference it will make.

@Bill_Gardner

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A clarification of policy from HHS Secretary Kathleen Sebelius suggests hospitals can help uninsured patients pay for private insurance through the new insurance exchanges without violating the federal anti-kickback statute.

–Joe Carlson, Modern Healthcare

@afrakt

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Sound Medicine is a radio show produced by the Indiana University School of Medicine and WFYI Public Radio. In the last few years, I’ve become their go-to guy on health policy. So, for those of you who would find your day brightened by the sound of my voice, enjoy the following:

Beginning Oct. 1, millions of uninsured Americans will be able to start the enrollment process for insurance under the Affordable Care Act. “Sound Medicine” health care policy analyst Aaron Carroll, M.D., M.S., speaks with Barbara Lewis about why it’s crucial to get the 19 million uninsured “young invincibles” signed up, too. Dr. Carroll explains that “young invincibles” are young adults ages 18 to 34 who don’t have health insurance and don’t believe they need it. Dr. Carroll stresses the need for this demographic because their participation will balance the insurance pool with an equal number of healthy and sick individuals.

Full audio after the jump

@aaronecarroll

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This week, a piece by Ben Smith has been making the rounds. It’s entitled, “Obama Prepares to Screw His Base.” How is he doing so? By making them pay more for health insurance. I respond in my latest piece at the AcademyHealth blog.  Go read!

@aaronecarroll

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