Are ObamaCare’s “Retroactive Advance Payments” for Buying Private Policies in States with Failed Exchanges Even Legal?

By Lambert Strether of Corrente.

Here’s a summary of the administration “fix” in question, otherwise known as a “rule change.” From CNBC:

Major tech problems at several state Obamacare enrollment websites are so bad that the federal government Thursday said it would give some people who in frustration bought health insurance outside those websites the tax subsidies that otherwise would be unavailable to them.

While the latest Obamacare fix, laid out in a complex, densely worded “guidance,” will affect a relatively small number of people, it is the first time that those subsidies are being allowed to be used for Affordable Care Act-compliant insurance plans bought outside the government-run health exchanges.

As part of the fix, the government also will allow people not yet enrolled in health insurance since Jan. 1 because of ongoing problems with some states’ Obamacare marketplaces to be covered retroactively once they obtain a plan from their state’s marketplace. Cost reduction subsidies also will be applied retroactively, according to the rule change by the Centers for Medicare and Medicaid Services.

The fix is available to states that adopt a formal process laid out by CMS. No state is obligated to implement the loosened rules.

And when CNBC says “complex” and “densely worded,” reader, they’re not kidding. From “CMS Bulletin to Marketplaces on Availability of Retroactive Advance Payments of the PTC and CSRs in 2014 Due to Exceptional Circumstances” [PDF]:

This guidance is being provided to Marketplaces that, due to technical issues in establishing automated eligibility and enrollment functionality, have had difficulty in providing timely eligibility determinations to applicants and enrolling qualified individuals in Qualified Health Plans (QHPs) through the Marketplace during the initial open enrollment period for the 2014 coverage year. Such a circumstance may be considered an exceptional circumstance for individuals who were unable to enroll in a QHP through the Marketplace due to these issues.

“[If] an individual in the exceptional circumstance described above is enrolled in QHP coverage offered outside of the Marketplace, when he or she receives a determination of eligibility for coverage through the Marketplace, the Marketplace may deem the individual to have been enrolled in the QHP through the Marketplace retroactive to the date on which the individual first enrolled in the QHP outside of the Marketplace…

An individual in the exceptional circumstance described above has not been enrolled in any health coverage continuously since January 1, 2014 , including QHP coverage offered outside of the Marketplace or otherwise, before a successful eligibility determination is obtained , when he or she receives a determination of eligibility for coverage through the Marketplace and enrolls in a QHP through the Marketplace , the Marketplace may allow for coverage retroactive to the date, established by the Marketplace, on which coverage would have been effective absent the exceptional circumstance described above, as provided under 45 CFR 155.310(f)(1) and 45 CFR 155.420(b)(2)(iii).

(We don’t have to dig into 45 CFR 155.310(f)(1) or 45 CFR 155.420(b)(2); everything there has to with enrollment after a given date; CMS just decided to make those dates retroactive.) But man oh man, I dunno. What’s an “exceptional circumstance,” anyhow? Figuring that out could really be a hassle, because exceptional circumstances, they’re exceptional!

Fortunately, we can watch people way smarter than we are grappling with these questions. Here’s an exchange between HHS and American College of Physicians staffers, in ACP’s handy annotated review of HHS’s “Exchange Standards for Employers” rule. HHS writes, in response to an ACP comment not relevant to our purpose here:

We note, however, that the special enrollment period for exceptional circumstances in §155.420(d)(9) of this final rule provides an additional opportunity for enrollment when unforeseen circumstances arise.

The ACP staffer annotates the HHS response:

The rule discusses the potential for special enrollment due to “exceptional circumstances” but according to the proposed rule, this would include natural disasters or other events that would prevent an individual from enrolling on a timely basis.

So let’s look at §155.420(d)(9):

§155.420 Special enrollment periods.

(d) Special enrollment periods. The Exchange must allow qualified individuals and enrollees to enroll in or change from one QHP to another as a result of the following triggering events: …

(9) A qualified individual or enrollee demonstrates to the Exchange, in accordance with guidelines issued by HHS*, that the individual meets other exceptional circumstances as the Exchange may provide.

Could the “guidelines issued by HHS” for “exceptional circumstances” include natural disasters? Apparently so. Could they include technical disasters? Apparently so — even though technical disasters during the Obama rollout were hardly exceptional, but rather the norm, whether for individuals or Exchanges, as Steven Brill shows. I mean, is an earthquake that happens every day for months really “exceptional”? Could the “guidelines issued by HHS” include technical disasters in states controlled by Democrats — Massachusetts, Oregon, Maryland, Nevada, and Hawaii — in an election year? Again, apparently so.

Now, it is true that the administration previously used the “exceptional circumstances” wheeze (as reviewed above by ACP) to extend deadlines for botched launch of ObamaCare’s Federal site:

And administration officials also warned they may again extend the Dec. 23 deadline for enrolling in Obamacare insurance plans for the start of the new year should “exceptional circumstances pose barriers to customers enrolling by that date” via HealthCare.gov and other government-run health exchanges. Those exchanges have seen drastically fewer numbers of people sign up for health plans than originally projected.

Of course, that doesn’t mean that “exceptional circumstances” were actually defined anywhere. Pro Publica:

HHS hinted last week that the enrollment deadline was still not set in stone. “We will consider moving this deadline to a later date should exceptional circumstances pose barriers to consumers enrolling on or before December 23.” The department’s fact sheet did not define “exceptional circumstances.”

However, as CNBC pointed out above, what’s really exceptionally remarkable about the “retroactive advance payments” is that they are subsidizing the purchase of private insurance outside the Exchanges. (One might well ask, then, why the Exchanges exist in the first place, if that’s jake with the angels?) The Times writes:

New Health Fix Offers Subsidies for Insurance Policies Bought Outside Exchanges

The Obama administration’s decision came as a surprise because the Affordable Care Act is clear: Federal subsidies are available only to people who enroll in a “qualified health plan” [QHP] through an exchange.

Sara Rosenbaum, a professor of health law and policy at George Washington University, said that by offering subsidies for insurance purchased outside an exchange, the Obama administration was avoiding a huge potential legal liability.

“People could have gone to court to obtain benefits denied without due process of law, because of a breakdown in government eligibility systems, and a judge would probably have ordered retroactive relief,” Ms. Rosenbaum said. “The federal government is voluntarily providing equitable relief that a court would have given.”

So, because a judge would probably have ordered retroactive relief, that’s the “exceptional circumstance”? Could be. But so far as I can tell from the HHS memo, they’re not making that argument. Anyhow, it’s not often I quote a conservative Republican, but there’s a first time for everything:

“The administration is blatantly ignoring the law, paying subsidies to plans outside of exchanges,” said Rep. Joe Pitts (R., Pa.), who chairs the House Energy and Commerce Committee health panel.

To which, if I were still a Democrat, I might respond: “We’re not ignoring the law. We’re just defining it. Operationally. Under exceptional circumstances….”

Yes, I like “exceptional circumstances” rather a lot. That phrase — at the risk of a Godwin’s Law violation — reminds me of Carl Schmitt‘s Political Theology:

Sovereign is he who decides on the exception. … It is precisely the exception that makes relevant the whole question of sovereignty. The precise details of an emergency cannot be anticipated, nor can one spell out what may take place in such a case, especially when it is a matter of extreme emergency, and of how it is to be eliminated. … The most guidance a constitution can provide is to indicate who can act in such a case. If such action is not subject to controls, if it is not hampered in some way by checks and balances, as is the case in a liberal constitution, then it is clear who the sovereign is. He decides whether there is an extreme emergency, as well as what must be done to eliminate it.

It’s like the crapification of the rule of law, isn’t it?

NOTE * I interpret this to mean that “guidelines issued” are the determination of exceptions themselves, case by case, rather than “guidelines issued” to define what exceptions actually are. Readers and/or HHS regulation geeks, please correct me!