Surprise! The Trump administration just admitted it has to follow Obamacare

HHS Secretary Alex Azar with President Trump. CREDIT: Chris Kleponis-Pool/Getty Images

In an unexpected development, the Department of Health and Human Services sent a letter to Idaho Gov. Butch Otter (R) on Thursday reluctantly conceding that Obamacare “remains the law and we have a duty to enforce and uphold the law.”

The letter, from Centers for Medicare & Medicaid Services Administrator Seema Verma, informs Idaho that insurers will not be allowed to sell illegal plans within that state which threatened to destabilize Idaho’s insurance markets.

Last January, Idaho’s top insurance regulator announced that the state would permit health insurers to sell illegal plans that do not comply with those insurers’ obligations under the Affordable Care Act. Shortly thereafter, Blue Cross of Idaho submitted several proposed illegal plans to state regulators, which it wished to sell within the state. The unlawful plans, known as “Freedom Blue” plans, “charge people with pre-existing conditions and older residents significantly more than currently allowed under the ACA.” They also place “an annual limit on coverage and wouldn’t cover maternity care.”

The danger of these illegal health plans is that they were likely to be attractive specifically to healthy consumers because they would be relatively cheap to purchase. But, as healthier consumers shifted into the illegal market, the legal market would be left with a less healthy population that is more expensive to insure. As a result, healthy people would be able to buy cheaper — but worse — insurance, while sicker patients would see their premiums go up significantly.

Verma’s letter is laden with language attacking Obamacare. In its very first sentence, it claims that “the Patient Protection and Affordable Care Act (PPACA) is failing to deliver quality health care options to the American people.” Nevertheless, Verma concedes that “if a state fails to substantially enforce the law, the Centers for Medicare & Medicaid Services (CMS) has a responsibility to enforce these provisions on behalf of the State.”

Among other things, Verma warns that insurers who sell unlawful plans in Idaho could face significant fines — as much as $100 per day, per individual sold an illegal health plan.

The letter is not all good news for supporters of stable health insurance markets. It notes that the Trump administration is trying to extend the availability of “short term, limited-duration health insurance” plans from three months to 12 months. These plans could also potentially destabilize markets by attracting healthier individuals into less generous health plans.

For the meantime, however, the Trump administration appears to have concluded that it is not above the law — at least with respect to this one effort to make an end run around Obamacare.