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 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!

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. ambrit

    Dear Lambert;
    “It’s like the crapification of the rule of law, isn’t it?”
    Gee pardner, it is the crapification of the rule of law.
    As to your oblique reference to the Enabling Act of 1933, that has happened already, on October 26, 2001.

    1. Jim Haygood

      “The federal government is voluntarily providing equitable relief that a court would have given.”

      If I were still a Democrat, I might suggest that King Barack provide Al Gore with retroactive advance relief by deeming him to have been elected president in 2000, thus affording Al a presidential pension and Secret Service protection.

      Rule of law? Ha ha ha! As Saddam Hussein used to say, ‘Anything is possible now, my brothers!’

  2. katiebird

    Exceptional circumstances. I like it. Make them use THAT as an excuse for Obama to retroactively expand Medicare and lower eligibility to Age Zero. Why use such a wonderfully broad power in such a puny way?

    1. jfleni

      katiebird says:
      “Exceptional circumstances. I like it. Make them use as an excuse for Obama to retroactively expand Medicare and lower eligibility to Age Zero. Why use such a wonderfully broad power in such a puny way?”

      I second that idea! Otherwise, IT experts will dither, bureaucrats will fumble, and nothing will get done until Barry leaves office, all at hideous expense! Medicare for all is the only answer, or to repeat what plutocrats always say “Never let crisis go to waste.”

      1. Carla

        I don’t know if younger people know this, but Medicare has been, and is being, privatized at an alarming rate. The Medicare of even 5 or 10 years ago was far, far superior to the Medicare of today.

        I’m not quite sure that the obfuscation of this privatization of Medicare was the whole reason behind Obamacare, but it’s a really delightful and wildly profitable “freebie” for the medical-industrial complex.

        Medicaid, of course, is completely f***ed, as Obamacare now throws more and more Americans into it.

        It will take us a very long time to recover from President Obama, if we ever can. But I suggest we start, wherever we are, and however we can, RIGHT NOW.

  3. John

    How long is this clusterf$ck (Obamacare) going to go on?
    If the Republicans take the Senate and the Whitehouse what comes next?
    Millions of us have been waiting for YEARS for some decent solutions and this is what we get?
    To be followed, no doubt, by worse from the Republicans.

    1. Lambert Strether Post author

      Yeah, one reason I felt some confidence leaving the cube for Maine in 2006 is that the Democrats would win in 2008, and even they couldn’t fuck up health reform. Pretty stupid, eh?

      1. John

        Washington, both sides, have no intention of giving the citizens of this country health care. They are committing genocide on the people of this country.

          1. Thor's Hammer

            Enough with this nonsense term Neo-liberalism. Just call it by its proper name, fascism.

            “The definition of fascism is The marriage of corporation and state ”
            ― Benito Mussolini

            1. ThroxxOfVron

              Is it fascism or oligarchy or a ‘modern’ feudalism?
              What is the functional difference?

              1. Nathanael

                Fascism builds infrastructure, so it isn’t fascism.

                In feudalism, the lords have obligations to the serfs, and if they don’t fulfill them, other lords can come in under the banner of freeing them from the oppressive lord. This is perhaps closest, but we seem to be losing the sense of obligation.

                What we’re seeing now is a collapse into outright kleptocracy.

                Oligarchy is a more general term encompassing all of that.

            2. Vatch

              I’m no defender of fascism or anything that remotely resembles fascism, but I have doubts that Mussolini said that. Please see what Wikiquote says about a very similar phrase that’s been attributed to Mussolini:


              This may be due to a mistranslation of the Italian word “corporatzione”. Of course, I don’t know Italian, so I could be completely wrong.

    2. different clue

      If the Rs retake Senate and White House they will make Ocare more purely Heritage. They will of course retain the Forced Mandate which Obama and Justice Roberts both consider the ultimate payload, with Ocare in general being only the delivery vehicle. Robert’s strikedown of mandatory Medicaid expansion was just some diversionary tinkering with the delivery vehicle.
      Maybe the Rs will repeal Medicaid expansion. But they will keep the Forced Mandate. Maybe the Rs will think it is their time to Ryanize and Privatize Medicare and flush it down the Forced Mandate Ochanges . . . exactly as intended eventually by Obama as part of his Long Game. Maybe the aging Tea Party demographic will try opposing the Ocare Endgame of privatising Medicare.

      1. Carla

        “If the Rs retake Senate and White House they will make Ocare more purely Heritage.”

        Already done.

        “Maybe the Rs will think it is their time to Ryanize and Privatize Medicare and flush it down the Forced Mandate Ochanges ”

        Already done.

        Here is triumph: there is NOTHING the Republicans can do that the Democrats haven’t already done.

        The Democrats have totally WON the neoliberal game. Now, what this country needs is a second party, so that we can have a two-party system.

        1. human


          Point, set and match!

          Can’t wait to see how this plays out in November. I’ll bring the popcorn.

  4. Splashoil

    Will the “exceptional circumstances” include those previously force placed into Medicaid?
    Inquiring mind want to know.

  5. susan the other

    This latest Obamafix reminds me of Putin’s description of Obama as a negotiator. Like playing chess with a pigeon who (paraphrasing – Putin said it much better) ignores the rules, struts all over the board, knocks the pieces over, thinks he has won; shits on the board and flies away.

    1. lee

      Is there a link to that quote, there’s some folks over at Daily Kos I want to try it out on.

      1. different clue

        You could send it to Kos as a quote “attributed to Putin”. Then you could say: did Putin really say that? If he didn’t, he could have.

  6. Nathanael

    Legal? With Keith Alexander and James Clapper in the administration, “legal” has clearly been completely thrown out the window. This and the previous administration are actually committing federal crimes, including violations of our Constitutional rights on a massive basis, and getting away with it — misinterpreting the law seems like a minor infraction, comparatively.

  7. bh2

    “Sovereign is he who decides on the exception.”

    The President is not the sovereign, but merely the executive. Nor can he bestow sovereignty upon himself, no matter by what tricky reasoning because sovereignty legally resides in the whole people — and in no one else.

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