Obama could let you keep your plan, but he doesn’t want to

 If I like your plan, you can keep it

Last Thursday morning, President Obama issued his latest proclamation in an attempt to save face on his farcical promise.  Of course, the “relief” came far too late and with far too many restrictions to have any practical, real-world effect.

It’s become instinctive at this point to assume that every policy decision that comes from the Obama administration is a blatant violation of separation of powers.  After all, this is the administration that unilaterally delayed enforcement of Obamacare’s employer mandate in direct violation of the statutory requirements.  Many prominent commentators have immediately jumped back on this bandwagon again in this latest Obamacare edict.

But here’s the real legal low-down: President Obama and his executive agencies (HHS/DOL/IRS) have almost unlimited discretion in determining what is considered a “grandfathered health plan.”

What’s more, grandfathered health plans are not required to offer the Obamacare mandate grab bag known as “essential health benefits” (see PPACA Section 1251(a)(2), page 55), and will qualify as “minimum essential coverage” for purposes of satisfying the individual mandate. (See IRC Section 5000A(f)(1)(D), as added by PPACA Section 1501, see page 150)

Jonathan Adler, law professor and contributor at The Volokh Conspiracy, deserves infinite credit for his brilliant work in conjunction with Michael Cannon of Cato in exposing the IRS’s unconstitutional regulations forcing Obamacare subsidies onto the federal exchange.  But he, along with many others, have missed the point on this one.  President Obama’s latest move isn’t wrong because it illegally allowed policies that don’t offer essential health benefits to operate after 12/31/13.  President Obama has gone wrong is by unconscionably failing to use his discretion to make grandfathered policies available to consumers in any useful way.

Grandfathered Health Plans Are Whatever President Obama Says They Are

PPACA Section 1251(e) (see page 52) defines a “grandfathered plan” as follows:

(e) DEFINITION.—In this title, the term ‘‘grandfathered health plan’’ means any group health plan or health insurance coverage to which this section applies.

That’s it.  In other words, there’s no meaningful definition of a “grandfathered health plan” in PPACA itself.

As I’ve written about previously, this gave the Obama administration full discretion in determining what plans you’ll be allowed to keep.  When his agencies responsible for implementing the law issued regulations to define “grandfathered health plan” in 2010, they acknowledged in the preamble exactly how much power Congress had handed over to them (emphasis added):

The statute does not, however, address at what point changes to a group health plan or health insurance coverage in which an individual was enrolled on March 23, 2010 are significant enough to cause the plan or health insurance coverage to cease to be a grandfathered health plan, leaving that question to be addressed by regulatory guidance.

Translation: Congress didn’t define “grandfathered health plan,” so the executive branch gets to.

Regulations Ban New Sales of Existing Grandfathered Individual Policies

In most cases, when employer-sponsored group health plans lose grandfathered status, the newly non-grandfathered plan is not required to provide “essential health benefits.”  This is because the regulations have exempted all self-insured and large group insured employer plans from the requirement.  HHS served up this nugget in footnote 64 on page 12869 of the 78th volume of the Federal Register (obviously).

However, when an individual policy loses grandfathered status, it’s a one-way ticket to the Obamacare exchange as a qualified health plan (QHP) that must offer the full suite of essential health benefits. (See PPACA Section 1301(a)(1)(B), page 58).

Now, let’s say you like your plan.  Let’s also say your insurance carrier has navigated the Rube Goldberg maze of requirements to maintain the policy’s grandfathered status.   So far, so good.

Now, let’s say you tell your neighbor about this great plan that’s managed to stay grandfathered and thus avoid some (but not all) of Obamacare’s mandates.  You tell your neighbor about the plan.  He wants to sign up for the grandfathered policy instead of a government-driven exchange plan.  Your neighbor is out of luck because he didn’t subscribe to the policy as of March 23, 2010.  Doh!

The point is that grandfathered individual policies in general don’t continue to exist in the Obamacare landscape.  You can keep THE grandfathered plan you’ve been enrolled in since March 23, 2010, but you can’t move to a different one.  If your circumstances change and you want a different type of coverage, you’re Obamacare exchange bound.  Didn’t pick up an individual policy until 2011 because you were covered under an employer plan in 2010?  Your new choice is Bronze, Silver, Gold, or Platinum.

And this all assumes your policy isn’t one of many that already lost grandfathered status, of which you have zero control, before President Obama’s latest announcement.  The instant the policy you were covered under on March 23, 2010 made one of the many common changes that cause a loss of grandfathered status, you were out of the grandfathered game and entering the Obamacare exchange world as of 2014 for good.

But don’t take my word for it, here’s the preamble to the grandfathered plan regulations (emphasis added):

Any policies sold in the group and individual health insurance markets to new entities or individuals after March 23, 2010 will not be grandfathered health plans even if the health insurance products sold to those subscribers were offered in the group or individual market before March 23, 2010.

Later in 2010, the Obama administration (HHS/DOL/IRS) came out with an amendment to the grandfathered plan regulations allowing a change of insurance carriers without causing loss of grandfathered status.  But the preamble to the amended regulations explicitly states that changing your policy on the individual market is still sudden death for grandfathered status (emphasis added):

Where insured coverage is provided not through a group health plan but instead in the individual market, a change in issuer would still be a change in the health insurance coverage in which the individual was enrolled on March 23, 2010, and thus the new individual policy, certificate, or contract of insurance would not be a grandfathered health plan.

President Obama Chose Not to Fix This

Why would President Obama delay the employer mandate and force subsidies on the federal exchange with no statutory authority, yet he won’t use his absurdly broad statutory authority to define “grandfathered health plan” in a manner that allows you to truly keep your plan if you like it?  The answer is because he wants you in the system, and the sooner the better.  The same reason Senate Democrats voted unanimously in 2010 against the Republican-led measure to disapprove of the grandfathered plan regulations.

Did you notice footnote 4 in the official CCIIO guidance implementing President Obama’s Thursday announcement?  They like to bury key points in footnotes.  It follows an unfortunate theme in how the administration handles grandfathered health plans (emphasis added):

In light of this condition, the transitional relief afforded in this document is not applicable to newly obtained health insurance coverage. It applies only with respect to individuals and small businesses with coverage that was in effect on October 1, 2013; it does not apply with respect to individuals and small businesses that obtain new coverage after October 1, 2013.

So if you want to keep your old policy into 2014, you must have been covered by it since March 23, 2010, and through October 1, 2013.  I sure hope you don’t need a different policy for any new life or health circumstances.  If so, you’re headed straight to the Obamacare exchange.

Bottom Line

Thanks to the Obama administration’s regulations, millions of Americans who purchase health coverage on the individual market will lose the plan they like.  President Obama’s Thursday announcement could have provided meaningful relief by expanding the scope of what constitutes a “grandfathered health plan.”  Instead, he ensured that the true individual market will soon cease to exist, even if there are a few policies that manage to jump through the hoops for a one-year extension.

So I ask the pertinent question: Obama, where art thou?

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