Insurers May Be Sued If They Accept Obamacare ‘Fix’

Protection: Insurance for insurance.
National Journal
Sam Baker
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Sam Baker
Nov. 21, 2013, 11:47 a.m.

If you like your health care plan, you can keep it — and sue the in­sur­ance com­pany for selling it to you. At least, that’s what some law­yers say.

In its at­tempt to let people keep their can­celed health care policies, the White House has said some plans don’t have to com­ply with cer­tain Obama­care re­quire­ments for an­oth­er year. But those re­quire­ments are still on the books, even if the White House isn’t en­for­cing them.

Cus­tom­ers who buy un­canceled plans can still sue in­sur­ance com­pan­ies for not meet­ing the law’s stand­ards, leg­al ex­perts say.

“If I was an in­sur­ance com­pany, I’d be very wor­ried about this,” said Jonath­an Adler, a law pro­fess­or at Case West­ern Re­serve Uni­versity, adding, “The law is still the law.”

Some states and in­sur­ance car­ri­ers are already skep­tic­al of Obama’s pro­pos­al and un­enthu­si­ast­ic about go­ing through the com­plic­ated pro­cess of un­canceling plans for just a year. The threat of law­suits could be an­oth­er reas­on for in­surers to re­ject the White House’s pro­pos­al.

Here’s how it works: The health care law sets cer­tain stand­ards for all in­di­vidu­al in­sur­ance plans. They have to cov­er a set of 10 “es­sen­tial be­ne­fits,” for ex­ample, and can’t im­pose life­time caps on cov­er­age. In­sur­ance com­pan­ies have been can­celing policies that don’t meet those stand­ards and don’t qual­i­fy for the re­l­at­ively nar­row “grand­fath­er­ing” ex­emp­tion writ­ten in­to the law.

The can­cel­la­tions caused such a polit­ic­al firestorm that the ad­min­is­tra­tion al­lowed in­sur­ance com­pan­ies to un­cancel their plans and sell them for an­oth­er year. In­surers can keep selling policies that don’t com­ply with all of the health care law, and the ad­min­is­tra­tion prom­ised to look the oth­er way.

But the stand­ards plans have to meet are writ­ten in­to the law. So, the ad­min­is­tra­tion might not do any­thing about plans that don’t meet the law’s re­quire­ments, but a con­sumer could still sue his or her in­sur­ance com­pany for selling a product that doesn’t cov­er ser­vices it is leg­ally re­quired to cov­er.

“The fact that the law still says what it says has im­plic­a­tions bey­ond the fed­er­al gov­ern­ment’s will­ing­ness to en­force it,” Adler said.

Adler is a crit­ic of the Af­ford­able Care Act, but more-sym­path­et­ic leg­al ex­perts share his view on po­ten­tial law­suits. Nich­olas Bagley, a law pro­fess­or at the Uni­versity of Michigan, said in­surers do ap­pear, at first glance, to be at risk for lit­ig­a­tion.

“I know enough to be able to say with some con­fid­ence that the in­surers have reas­on to be wor­ried,” Bagley said.

This dy­nam­ic could change as the ad­min­is­tra­tion fleshes out its pro­pos­al. But its ini­tial rol­lout didn’t do any­thing to shield in­sur­ance com­pan­ies, Adler said.

“An in­surer who con­tin­ues to provide a policy that does not com­ply with the ACA’s re­quire­ments, and denies pay­ment for an ACA-covered pro­ced­ure in keep­ing with the policy, could be sued by the en­rollee,” said Chris Holt and Laura Collins, policy ana­lysts at the con­ser­vat­ive Amer­ic­an Ac­tion For­um.

In press ac­counts and in a brief let­ter to state in­sur­ance reg­u­lat­ors, the ad­min­is­tra­tion simply said it doesn’t plan to en­force the health care law’s re­quire­ments for cer­tain policies. It didn’t try to make the case that the law it­self calls for a gradu­al trans­ition to the new re­quire­ments.

That ap­proach might at least give the ad­min­is­tra­tion’s de­cision more weight if any­one does sue their in­surer.

“I’m not sure that that would work,” Adler said, “but that would raise dif­fer­ent ques­tions, and there would be a stronger ar­gu­ment there.”

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