ASSOCIATION FOR COMMUNITY AFFILIATED PLANS, ET AL., APPELLANTS v. UNITED STATES DEPARTMENT OF THE TREASURY, ET AL., APPELLEES
No. 19-5212
Unitеd States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued March 20, 2020
Decided July 17, 2020
Appeal from the United States District Court for the District of Columbia
(No. 1:18-cv-02133)
Charles A. Rothfeld argued the cause for appellants. With him on the briefs was Andrew J. Pincus.
Douglas N. Letter, General Counsel, U.S. House of Representatives, Todd B. Tatelman, Deputy General Counsel, Megan Barbero, Associate General Counsel, Adam A. Grogg, Assistant General Counsel, Elizabeth B. Wydra, Brianne J. Gorod, and Ashwin P. Phatak were on the brief for amicus curiae U.S. House of Representatives in support of appellants.
Chad I. Golder was on the brief for amici curiae American Medical Association, et al. in support of appellants.
Kelly Bagby and Dara S. Smith were on the brief for amici curiae AARP, et al. in support of appellants.
Joseph R. Palmore and James Sigel were on the brief for amici curiae National American Cancer Society, et al. in support of plaintiffs-appellants.
Daniel Winik, Attorney, U.S. Department of Justice, argued the cause for appellees. With him on the brief was Alisа B. Klein, Attorney.
Robert Alt and Ilya Shapiro were on the brief for amici curiae The Buckeye Institute, et al. in support of defendants-appellees.
Monica Derbes Gibson was on the brief for amicus curiae Louisiana Commissioner of Insurance James J. Donelon in support of appellees and in support of affirmance.
Lawrence G. Wasden, Attorney General, Office of the Attorney General for the State of Idaho, Brian Kane, Assistant Chief Deputy, Megan A. Larrondo, Deputy Attorney General, and Anthony F. Shelley were on the brief for amici curiae State of Idaho, et al. in support of appellees and in support of affirmance.
Before: ROGERS, GRIFFITH, and KATSAS, Circuit Judges.
Opinion for the Court filed by Circuit Judge GRIFFITH.
Dissenting opinion filed by Circuit Judge ROGERS.
I
A
Congress first carved out an exception for STLDI in the Health Insurance Portability and Accountability Act of 1996 (HIPAA), Pub. L. No. 104-191, § 102(a), 110 Stat. 1936, 1973 (codified at
When Congress enacted the ACA in 2010 to “expand coverage in the individual health insurance market,” King v. Burwell, 135 S. Ct. 2480, 2485 (2015), it incorporated by cross-reference HIPAA‘s definition of “individual health insurance coverage,” including its exclusiоn of STLDI, see Pub. L. No. 111-148, § 1551, 124 Stat. 119, 258 (2010). As a result, STLDI policies were not subject to many of the ACA‘s key reforms, which applied only to “individual health insurance coverage.”
Those key reforms included a combination of carrots and sticks that encouraged consumers to purchase more comprehensive coverage and ensured that they had the financial means to do so. The ACA‘s “guaranteed issue” and “community rating” provisions prohibited insurers from denying coverage or charging higher premiums based on an individual‘s race, gender, or health status. See
More than 85% of those purchasing insurance on the Exchanges do so using federal tax credits. See King, 135 S. Ct. at 2493; Wu Decl. ¶ 6, J.A. 91. These credits effectively cap the amount of money a person can expect to pay toward her insurance. For example, a single person whose
Because the ACA directed the states to expand their Medicaid coverage, Congress assumed that those below the fedеral poverty line would be covered and did not make them eligible for federal subsidies. But after NFIB v. Sebelius, 567 U.S. 519 (2012), held that the ACA‘s Medicaid expansion must be deemed optional to be constitutional, 2.3 million Americans were left unable to afford insurance in states that declined to expand their Medicaid programs, resulting in what‘s now called the Medicaid coverage gap. See Kaiser Family Foundation, The Coverage Gap: Uninsured Poor Adults in States that Do Not Expand Medicaid (Jan. 14, 2020), https://www.kff.org/medicaid/issue-brief/the-coverage-gap-uninsured-poor-adults-in-states-that-do-not-expand-medicaid.
When the Exchanges opened in 2014 and premiums started to rise, consumers seeking cheaper insurance turned to STLDI policies. These policies can be purchased at a fraction of the cost because they are exempt from the ACA‘s community-rating, guaranteed-issue, and essential-health-benefits requirements. But you get what you pay for. STLDI plans offer skimpier coverage and higher deductibles. They often еxpose consumers with undiagnosed preexisting conditions to the risk of cancellation. And because they don‘t qualify as “minimum essential coverage,” they don‘t satisfy the individual mandate, meaning that those insured under STLDI plans may be subject to the tax penalty.1 Still, for those in the Medicaid coverage gap or otherwise unable to afford an ACA-compliant plan, a barebones STLDI policy is better than nothing.
In 2016, the Departments became concerned that these policies were drawing healthy Americans out of the risk pool for ACA-compliant insurance, causing premiums to rise. To discourage people from purchasing STLDI policies as their primary insurance, the Departments revised the definition of STLDI to cover only plans that expired “less than 3 months after the original effective date of the contract.” Excepted Benefits; Lifetime and Annual Limits; and Short-Term, Limited-Duration Insurance, 81 Fed. Reg. 75,316, 73,326 (Oct. 31, 2016). By capping STLDI plans at three months and prohibiting renewals, the Departments hoped to minimize the use of STLDI as a “primary form of health coverage,” reducing “adverse[] impact[s] [on] the risk pool for Affordable Care Act-compliant coverage.” Id. at 75,317-18. Although some commenters pointed out that the rule wouldn‘t prevent insurers from stringing together four three-month-long STLDI policies to create year-round coverage, the Departments decided that a prohibition on such bundling would be too difficult to enforce. Id. at 75,318. Thus, even under the 2016 Rule, insurers could—and did—market STLDI policies in year-round blocks.
Despite the Departments’ efforts, premiums in the individual health insurance market continued to soar. Between 2016 and 2017, average premiums shot up 21%, while Exchange enrollment of unsubsidized adults fell by almost the same percentage
In 2018, the Departments proposed returning to the original definition of STLDI. Short-Term, Limited-Duration Insurance, 83 Fed. Reg. 7,437, 7,446 (Feb. 21, 2018). Following a comment period, the Departments issued a final rule defining STLDI as coverage with an initial contract term of less than one year and a maximum duration of three years counting renewals. 83 Fed. Reg. at 38,243. The Departments also expanded disclosure requirements, directing insurers to include a disclaimer that STLDI policies may “exclu[de] coverage of preexisting conditions,” may not provide certain “health benefits,” and may not trigger a special enrollment period if coverage expires mid-year. Id.
Two main reasons were given for the new rule: (1) increasing access to affordable health insurance, especially among the uninsured, and (2) increasing consumer choice. The Departments explained that although the 2016 Rule “was intended to boost enrollment in individual health insurance coverage... it did not succeed in that regard,” so “expansion of additionаl coverage options... [was] necessary.” Id. at 38,214. They reasoned that the new rule would “expand[] access to additional, more affordable coverage options for individuals, including those who might otherwise be uninsured, as well as to those who do not qualify for [premium tax credits],” such as those in the Medicaid coverage gap. Id. at 38,216. The Departments acknowledged that expanding the availability of STLDI “could have an impact on the risk pools for individual health insurance coverage[] and could therefore raise premiums.” Id. at 38,217. However, they predicted that this effect would be modest, as subsidized enrollees were shielded from the effect of rising premiums. Moreover, because subsidies were available only on the Exchanges and “the individual subsidized premium [was] so low,” they anticipated that most “healthy lower-income individuals [would] remain in [their ACA-compliant] plans.” Id. at 38,235-36.
The Departments estimated that approximately 100,000 uninsured people would enroll in STLDI plans in 2019 and approximately 500,000 people would swap their ACA-compliant plans for STLDI plans, producing a 1% increase in unsubsidized premiums. Id. at 38,236. By 2028, the Departments projected that 200,000 previously uninsured individuals would enroll in STLDI plans, and 1.3 million individuals would shift from ACA-compliant plans to STLDI plans. Id. This would lead to a 5% increase in unsubsidized premiums. Id. The Congressional Budget Office and the Urban Institute both projected that the share of new STLDI enrollees who were previously uninsured would be somewhat higher (35% and 40% respectively). See id. at 38,237-38.
B
ACAP challenged the STLDI Rule, alleging that it was contrary to law and arbitrary and capricious. The district court held that ACAP had competitor standing because its members—private insurers selling plans on government Exchanges—faced growing competition from the STLDI market. On the merits, the district court granted the Departments’ motion for summary judgment, holding that the STLDI Rule was a reasonable interpretation of HIPAA and the ACA and that the change from the 2016 Rule to the current
II
ACAP argues that the STLDI Rule is contrary to law because it is inconsistent with HIPAA‘s plain text and an unreasonable interpretation of that text in light of the ACA‘s structure and purpose. We are not persuaded.
A
Recall that the phrase “short-term limited duration insurance” does not appear in the ACA. Instead, the ACA incorporates by cross-reference HIPAA‘s definition of “individual health insurance coverage,” which in turn is defined to exclude “short-term limited duration insurance.” See Pub. L. No. 111-148, § 1551, 124 Stat. at 258;
1
ACAP argues that the Departments’ definition involves an unreasonable interpretation of “short-term” for two reasons.
First, ACAP argues that the ACA‘s definition of “short covеrage gaps” restricts the Departments’ discretion to define “short-term” as used in HIPAA and incorporated by cross-reference into the ACA. Noting that the ACA exempts from the individual mandate persons who experience “short coverage gaps” of “less than 3 months,”
We cannot agree that Congress intended to amend HIPAA, a statute written over a decade before the ACA, in such a roundabout way. “[W]e will not understand Congress to have amended [a prior] act by implication unless there is a positive repugnancy between the provisions of the preexisting and newly enacted statutes, as well as language manifesting Congress‘s considered determination of the ostensible change.” U.S. Ass‘n of Reptile Keepers, Inc. v. Zinke, 852 F.3d 1131, 1141 (D.C. Cir. 2017) (internal quotation marks omitted). Congress knows hоw to impose time limits—after all, it defined “short coverage gaps” as “less than 3 months“—but it didn‘t do so for STLDI plans.
Second, ACAP responds that even if the ACA doesn‘t limit “short-term” insurance to three months, the Departments’ definition still contradicts the plain text of HIPAA. “Short-term” means “occurring over or involving a relatively short period of time.” Short-Term, WEBSTER‘S THIRD NEW INTERNATIONAL DICTIONARY 2103 (1981). As ACAP sees it, an STLDI policy must be “meaningfully shorter than the standard annual insurance term,” and a 364-day policy is not “meaningfully shorter” than a 365-day one. ACAP Br. 51.
ACAP would impose an artificial limitation on the Departments’ discretion by requiring STLDI policies to be not just “shorter” than the standard term but “meaningfully” so. This limitation finds no support in the text and strikes us as unworkable. Can the Departments cap STLDI plans at nine months? Ten months? Eleven months? Without further guidance from Congress, we will not place amorphous restrictions on the Departments’ authority to define such an open-ended term. It suffices to say that the Departments have the discretion to define STLDI to include policies shorter than the standard policy term.
2
ACAP next argues that the Departments’ definition is not properly confined to “limited duration” plans. It would seem that a plan that cannot be renewed beyond three years is, quite literally, “limited” in “duration.” Nevertheless, in an effort to evade the phrase‘s ordinary meaning, ACAP suggests that “limited duration” actually means “nonrenewable.” ACAP Br. 56. One of HIPAA‘s central reforms was to guarantee renewability of most “individual health insurance coverage.”
ACAP responds that if “limited duration” does not mean “nonrenewable,” then it‘s redundant of “short term.” Not so. Under the Departments’ definition, “short-term” refers to the initial contract term, while “limited duration” refers to the policy‘s total length, including renewals. This reasonable reading gives independent meaning to each term.
In any event, the Departments didn‘t pick the three-year limitation out of a hat. They matched the duration of STLDI policies to that of similar types of temporary insurance, such as COBRA. See 83 Fed. Reg. at 38,221 (noting that COBRA “requires certain group health plan sponsors to provide a temporary continuation coverage option for a minimum of 18, 29, or 36 months“); see also id. (explaining that the Federal Employees Health Benefits Program permits temporary continuation of coverage for up to three years). Congress granted the Departments wide latitude to define STLDI, and while the Departments retain the flexibility to narrow their definition in the future, nothing in the text forecloses their current interpretation.
B
ACAP next argues that the STLDI Rule is “irreconcilable with the structure and policy of the ACA,” ACAP Br. 25, and will ravage the government Exchanges. We disagree.
ACAP‘s core contention is that the STLDI Rule contravenes the spirit of the ACA. ACAP contends that “Congress‘s plan was to create a single, ACA-compliant individual market.” ACAP Br. 42 (emphasis added). ACAP says that the STLDI Rule is unreasonable because it facilitates the development of a parallel, “shadow” market for plans that do not provide comprehensive coverage. ACAP Reply 3. But the exception for STLDI is baked into the statute itself. By its own terms, the ACA exempts STLDI plans from the provisions requiring insurers to provide certain benefits, see
And the Departments reasonably defined the contours of that exception. On the day that Congress enacted the ACA, HIPAA had excluded “short-term limited duration insurance” from the definition of “individual health insurance coverage” for over a decade. And for all that time, the Departments had defined the term almost exactly as they do today. That is powerful evidence that the modern STLDI Rule is consistent with the ACA. After all, “[w]here Congress ‘adopts a new law incorporating sections of a prior law, Congress normally can be presumed to have had knowledge of the interpretation given to the incorporated law, at least insofar as it affects the new statute.‘” Gordon v. U.S. Capitol Police, 778 F.3d 158, 165 (D.C. Cir. 2015) (quoting Lorillard v. Pons, 434 U.S. 575, 581 (1978)).
ACAP argues that there‘s “no evidence that Congress was even aware of the Departments’ interpretation... when it enacted the ACA.” ACAP Br. 48. But if there were ever “reason to assume[] congressional familiarity with the administrative interpretation at issue,” Public Citizen, Inc. v. HHS, 332 F.3d 654, 669 (D.C. Cir. 2003), it is here, where “[d]espite the ACA‘s sweeping reforms,” Congress “left intact and incorporated” the STLDI exception, Central United Life Insurance Co. v. Burwell, 827 F.3d 70, 72 (D.C. Cir. 2016).
ACAP objects that Congress would‘ve spoken more clearly had it had intended to empower the Departments to permit the sale of a primary insurance product outside of the ACA-compliant marketplace. Riffing on Justice Scalia, ACAP accuses the Departments of trying to squeeze a “regulatory elephant” into a “statutory mousehole.” ACAP Br. 40 n.15 (citing Whitman v. Am. Trucking Ass‘ns, Inc., 531 U.S. 457, 468 (2001)). But a legislative provision authorizing the Departments to define an entire category of insurance not subject to ordinary federal standards is no “mousehole.” And a regulation that has only modest effects on the government Exchanges is no “elephant.”
Nevertheless, ACAP insists that Congress likely did not expect insurance companies to market STLDI as primary insurance. Instead, ACAP says, Congress must have assumed that STLDI would be sold as temporary coverage that did not compete with ACA-compliant plans. The dissent goes further, suggesting that Congress ”decided not to allow consumers to purchase plans offering less than minimum ‘essential health benefits’ as their primary form of coverage.” Dissent at 6 (emphasis added). The problem with this argument is that Congress expressly elected not to set up a Hobson‘s choice between
For example, in addition to STLDI, Congress left in place exceptions for “fixed indemnity” insurance, which pays out a set amount for predetermined events such as hospitalization.
ACAP frames the ACA as relentlessly pursuing one goal: maximizing the number of individuals with comprehensive health insurance. But “no legislation pursues its purposes at all costs.” See Albany Eng’g Corp. v. FERC, 548 F.3d 1071, 1076 (D.C. Cir. 2008) (quoting Rodriguez v. United States, 480 U.S. 522, 525-26 (1987)). And like most statutes, the ACA pursues multiple competing missions, among them expanding coverage, decreasing premiums, and maximizing quality. The STLDI Rule reasonably balances those goals by expanding coverage to the uninsured, including those in the Medicaid coverage gap, at the expense of higher unsubsidized premiums for comprehensive insurance. Balancing the costs and benefits of expanding the length of STLDI policies is the Departments’ bailiwick. And whatever choice we might have made in their shoes, we cannot substitute our judgment for theirs.
2
ACAP next objects that the Departments cannot adopt an interpretation of STLDI that would lay waste to one of the ACA‘s key reforms: the Exchanges. Although we agree that the Departments may not adopt a definition of STLDI that “would destabilize the individual insurance market... and likely create the very ‘death spirals’ that Congress designed the Act to avoid,” King, 135 S. Ct. at 2493, the Departments reasonably predicted that the Rule‘s impacts on Exchange enrollment and premiums would be limited. And experience has borne out that prediction.
We defer to “reasonable agency prediction[s] about the future impact of [thе agency‘s] own regulatory policies.” Louisiana Energy & Power Auth. v. FERC, 141 F.3d 364, 370 (D.C. Cir. 1998). Here, the Departments reasonably concluded that the Rule‘s potential effects on premiums would be relatively small. Compare 38 Fed. Reg. at 38,236-38 (predicting a 5% increase), with King, 135 S. Ct. at 2493 (predicting as much as a 47% increase). And the Departments reasonably predicted that the Rule‘s potential effects on Exchange enrollment would be blunted by federal subsidies. The vast majority of individuals purchasing plans on the Exchanges
This prediction was shared by the Congressional Budget Office and several nongovernmental organizations, including opponents of the STLDI Rule. See id. at 38,325-28. As even a report commissioned by ACAP acknowledged, “the concept of a death spiral... is less applicable” to the Exchanges because the subsidies soak up premium increases. See Wakely Consulting Group, Effects of Short-Term Limited Duration Plans on the ACA-Compliant Individual Market 3, http://www.communityplans.net/wp-content/uploads/2018/04/Wakely-Short-Term-Limited-Duration-Plans-Report.pdf; see also ACAP Comment at 5, J.A. 393 (citing this report).
Experience confirms these predictions were reasonable. Following the promulgation of the STLDI Rule, premiums for benchmark Exchange plans actually fell by 1.5% in 2019. See Wu Decl. ¶ 18, J.A. 94-95. And in 2020, premiums for those same benchmark plans dropped another 4%. See Press Release, Centers for Medicare & Medicaid Services (Oct. 22, 2019), https://www.cms.gov/newsroom/press-releases/premiums-healthcaregov-plans-are-down-4-percent-remain-unaffordable-non-subsidized-consumers. Similarly, participation in the Exchanges was not obviously correlated with the new Rule. Indeed, enrollment went up in some states that permitted the sale of year-long STLDI policies and down in others that restricted its sale to shorter time periods. See Wu Decl. ¶¶ 21-22, J.A. 95-96. Because the Departments reasonably (and, as it turns out, correctly) predicted that the STLDI Rule would not result in a premium-driven mass exit from the Exchanges, we reject ACAP‘s argument that the Rule is invalid based on speculation about its potential, unrealized effects.
III
Finally, ACAP argues that the STLDI Rule is arbitrary and capricious. Once again, we disagree.
First, ACAP says that the Departments failed to consider the impact of the STLDI Rule on the Exchanges and relied on factors that Congress had not intended them to consider. But the Departments expressly acknowledged that expanding the length of STLDI plans “could have an impact on the [Exchange] risk pools” and “could therefore raise premiums.” 83 Fed. Reg. at 38,217. They concluded, however, that such an impact would be relatively minor and that the need to expand affordable coverage options, especially for those who could not afford ACA-compliant insuranсe, “substantially outweigh[ed]” that impact. Id. We therefore reject ACAP‘s assertion that the Departments failed to consider the Rule‘s effects or acted outside of their discretion to balance the statute‘s competing policy goals.
Next, ACAP argues that the Departments failed to adequately explain their departure from the 2016 Rule. “Agencies are free to change their existing policies as long as they provide a reasoned explanation for the change.” Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2125 (2016). The agency “need not demonstrate to a court‘s satisfaction that the reasons for the new policy are better than the reasons for the old one.” FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009). “[I]t suffices that the new policy is permissible under the statute, that there are good reasons for it, and that the agency believes it to be better...” Id.
The Departments amply met this obligation. As the Departments explained, the 2016 Rule “did not succeed” in “boost[ing] enrollment in individual health insurance coverage.” 83 Fed. Reg. at 38,214. Instead, average monthly enrollment dropped by 10%, and average monthly premiums increased by 21% from 2016 to 2017. Id. Acknowledging that expanding the availability of STLDI plans would draw some individuals out of comprehensive plans into skimpier STLDI plans, see id. at 38,236, the Departments reasoned that the change would be beneficial because it would “reduce the fraction of the population that is uninsured,” id. at 38,228. Especially given the advent of the Medicaid coverage gap, it was reasonable for the Departments to strive to create cheaper coverage options for those who might otherwise go uninsured.
Last, ACAP argues that the STLDI Rule could produce coverage gaps for consumers whose STLDI policies expire mid-year. Adults who lose their ACA-compliant coverage qualify for a special enrollment period.
The Departments reasoned that the 2016 Rule exacerbated the coverage-gap problem becаuse three-month STLDI plans were often not long enough to tide people over to the next open enrollment period. See 83 Fed. Reg. at 38,217. For example, an individual who lost coverage in February and was not entitled to a special enrollment period would have to wait until November to enroll. Allowing STLDI policies to run for just under one year ensures that individuals can always purchase a policy to fit their need for temporary coverage.
ACAP responds that as long as individuals only use STLDI to bridge gaps between two ACA-compliant policies, there need never be a coverage-gap issue under the 2016 Rule. But the reality is that even under the 2016 Rule, many individuals were purchasing STLDI as their primary insurance. For those people, the 2016 Rule created more volatility because they could be “subject to re-underwriting” every three months, could see a “greatly increased” premium, could be denied a new policy “based on preexisting medical conditions,” and “would not get credit” toward any deductible on a new plan “for money spent toward the deductible during the previous 3 months.” 83 Fed. Reg. at 38,218. Finally, to ensure that persons considering purchasing an STLDI policy in lieu of an ACA-compliant one would be aware of the risk of coverage gaps, the Departments required insurers to include a disclaimer that the loss of STLDI coverage may not trigger a special enrollment period. Id. at 38,243. Under our deferential standard of review, that is sufficient to respond to commenters’ concerns.
IV
The dissent would invalidate the STLDI Rule as “inconsistent with the [ACA‘s] statutory scheme.” Dissent at 6. But the dissent never says what that scheme requires. The dissent acknowledges that Congress expressly exempted STLDI policies from the statute‘s requirements, leaving in place the Departments’ longstanding regulatory definition. Id. at 3. The dissent does not suggest that the ACA required the
Departments to initiate a rulemaking to change that definition. Nor does the dissent adopt ACAP‘s more extreme
Boiled down, the dissent‘s objection to the STLDI Rule is a prudential one—STLDI plans aren‘t good for consumers, so they should be restricted as much as possible. But so long as the Departments have acted within the bounds of their statutorily delegated authority, that policy judgment is theirs to make. When Congress delegates decisionmaking authority to an agency, it sacrifices control for flexibility. Delegation empowers a comparatively nimbler actor to respond to changed circumstances and unanticipated consequences. Sometimes (perhaps often), the agency will have to make policy tradeoffs in real-world settings that Congress did not imagine. That is exactly what happened here. In 2016, the Departments changed the definition of STLDI to respond to concerns about increasing premiums and decreasing еnrollment. Two years later, confronted by still-increasing premiums and the Medicaid coverage gap, the Departments decided that expanding affordable coverage options was the way to go. If Congress disagrees with that decision, it can take back the reins. Or if a new Administration comes to power with a different vision of how the ACA‘s competing policy goals should be balanced, it can revisit the Departments’ choice. But as judges, our role is narrow: to ensure only that the Departments reasonably exercised the policymaking authority granted to them and not to us. Because the Departments satisfied that constraint, we leave the STLDI Rule in place.
V
Having concluded that the STLDI Rule is neither contrary to law nor arbitrary and capricious, we affirm.
So ordered.
ROGERS, Circuit Judge, dissenting: Today the court upholds a Rule defining “short-term limited duration insurance” (“STLDI“) to include plans that last for up to three years and function as their purchasers’ primary form of health insurance, in stark contrast to the gap-filling purpose for which such plans were created. Because STLDI plans are exempt from the requirements of the Patient Protection and Affordable Care Act (“ACA“), insurers offering them can cut costs by denying basic benefits, price discriminating based on age and health status, and refusing coverage to older individuals and those with preexisting conditions. As a result, they leave enrollees without benefits that Congress deemed essential and disproportionately draw young, healthy individuals out of the “single risk pool” that Congress deemed critical to the success of the ACA‘s statutory scheme.
I.
The ACA is a comprehensive stаtutory scheme that Congress enacted to address certain problems that had existed for decades
The ACA addressed these problems through a particular “series of interlocking reforms” designed to promote fair access to comprehensive, affordable coverage. King, 135 S. Ct. at 2485. As to fair access, the ACA‘s central provisions include “guaranteed issue” and “community rating” requirements, which mandate that insurers accept everyone who applies for coverage and limit price discrimination, respectively.
Congress provided for certain limited exemptions from the ACA‘s requirements, including the exemption of “short-term limited duration insurance.”
Following the ACA‘s enactment, some insurers began to offer STLDI plans “in situations other than those that the exception from the definition of individual health insurance coverage was initially intended to address,” namely, as purchasing individuals’ “primary form of health coverage.” 2016 Final Rule,
On January 20, 2017, the day President Trump took office, he issued an executive order announcing his administration‘s intention “to seek the prompt repeal of the Patient Protection and Affordable Care Act.” Exec. Order No. 13,765, Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal,
Following this directive, the Departments promulgated a Rule designed to facilitate the use of STLDI as “an affordable alternative” to ACA-compliant insurance. 2018 Final Rule,
II.
In administering the ACA, the Departments “are bound, not only by the ultimate purposes Congress has selected, but by the means it has deemed appropriate, and
The Rule departs from the ACA‘s structure in several significant ways, recreating the problems that existed in the American health insurance market before the statute‘s enactment and that the statute was designed to solve. First, the Rule promotes the use of STLDI plans to circumvent the coverage requirements that Congress deemed essential. The Departments state that the Rule “empowers consumers to purchase the benefits they want and reduce overinsurance.” 2018 Final Rule,
Unsurprisingly, failing to provide minimum essential benefits allows STLDI issuers to charge approximately half the cost of an average, unsubsidized ACA-compliant plan available through the Exchange, 2018 Final Rule,
Second, because STLDI plans need not comply with the ACA‘s guaranteed issue and community rating requirements, insurers can further cut costs by discriminating based on preexisting conditions, age, or any other factor. While this may seem to benefit those individuals who qualify for STLDI plans, cancellation may occur retroactively, resulting in abrupt and unexрected loss of coverage. Amicus Br. of AARP et al. 15; Amicus Br. of Am. Med. Ass‘n et al. 22-23. For example, one Arizona woman who enrolled in STLDI was hospitalized with an abdominal infection a few weeks after receiving emergency surgery for diverticulitis. Amicus Br. of Am. Med. Ass‘n et al. 22. Her insurer treated the diverticulitis as a preexisting condition and canceled her plan, leaving her with $97,000 in medical bills. Id. at 22-23. In this respect, as in terms of their less than comprehensive coverage, STLDI plans may “benefit insurance companies more than the patients who purchase them.” Id. at 27 (quoting Shelby Livingston, Short-Term Health Plans Spend Little on Medical Care, MODERN HEALTHCARE, Aug. 6, 2019).
Third, not only does the use of STLDI as primary health insurance leave enrollees without congressionally mandated protections, but it also fractures the “single risk pool” that Congress deemed critical to the success of the ACA.
III.
None of the court‘s attempts to defend the Rule as consistent with the ACA is persuasive. First, the court places considerable weight on the similarity between the 2018 Final Rule and a prior rule defining “short-term limited duration insurance” that was in effect when the ACA was enacted, suggesting that this similarity is “powerful evidence” that the Departments’ interpretation is consistent with the statute. Op. 14. To the contrary, there was no reason for Congress to expect that consumers would begin purchasing STLDI plans as their primary form of health insurance, considering that when Congress enacted the ACA, STLDI was simply a product used to fill gaps in coverage, as the Departments have acknowledged. See 2018 Final Rule,
Second, the court surmises that for individuals who otherwise would go uninsured, “a barebones STLDI policy is better than nothing.” Op. 6. Although the Departments
Third, the court brushes aside the Departments’ own estimate that the Rule would increase premiums for ACA- compliant coverage by 5% within a decade by stating that this predicted impact, confirmed by experience since the Rule took effect, is “relatively small.” Op. 17. By this logic, the Executive Branch may incrementally chip away at a statute by promulgating rules that undermine the statutory scheme, so long as the effect of each regulatory action is sufficiently modest. When an agency prioritizes its own policy objectives over thosе that Congress enacted, as occurred here, this court necessarily must conclude that the agency‘s action was arbitrary and capricious. See Gresham v. Azar, 950 F.3d 93, 104 (D.C. Cir. 2020).
In sum, “[e]ven under under Chevron‘s deferential framework, . . . reasonable statutory interpretation must account for both ‘the specific context in which . . . language is used’ and ‘the broader context of the statute as a whole.‘” Util. Air Regulatory Grp. v. EPA, 573 U.S. 302, 321 (2014) (third alteration in original) (quoting Robinson v. Shell Oil Co., 519 U.S. 337, 341 (1997)). The Departments’ Rule fails to account for the specific context in which the term “short-term limited duration insurance” was used at the time of the ACA‘s enactment, namely to refer to a well-understood insurance product used to fill gaps in coverage, not to serve as an individual‘s primary form of health insurance. The Rule further fails to account for the general context of the ACA‘s scheme by undermining the particular “series of interlocking reforms” included in the statute to ensure fair access to comprehensive, affordable medical coverage and recreating the same problems in the health insurance market that the ACA was designed to solve. King, 135 S. Ct. at 2485. Accordingly, I respectfully dissent.