Today, the media reports that the White House will issue new rules interpreting the landmark health reform legislation President Obama signed this month — in particular the provisions that prohibit insurance companies from denying coverage to children with pre-existing medical conditions, which has long been one of the most controversial practices in the industry. After reading the article, what administrative law issues can you spot?
Issue spotting exercise
March 30, 2010 by Nathan Cortez
As this is a hot button issue, it seems like opportunity for public comment would be very helpful here. The article indicates that the Administration will be issuing a rule that interprets the new health care legislation. But many insurance administrators and perhaps the general public seem to be confused and have differing opinions regarding how the legislation should be interpreted and implemented as a rule. Due to this confusion, interest, and speculation, an opportunity for public comment would likely be helpful before a rule is promulgated. However, it could be argued that health care, and especially insurance for children with pre-existing conditions, is so politically polarizing right now that a public comment period would not be helpful. If that is true, perhaps the Administration’s promulgation of a rule will be an efficient end to the argument.
The first issue that came to my mind was that of interpretive rules. Here the White House is interpreting the vague language regarding children and the pre-existing condition language found in the recent health care reform legislation. But unlike the examples we discussed in class, the White House does not seem to be proposing guidelines, but rather binding rules. One could argue that this is a legislative rule, requiring APA procedures such as a comment period. The aim of the rule seems to be to prevent a loophole in the legislation and thus would have a “substantial impact” on individuals and companies outside the agency. On the other hand, would a notice/comment period be helpful? Maybe not. Although controversial, it would be difficult for insurance companies to make a winning arguement that denying sick kids coverage is okay.
The initial issue that I noticed was whether HHS was making legislative “rules” that would be binding, as compared to non-legislative policy statements or interpretative rules. Here, the language describing the rules with phrases such as “may not” and “will no longer be allowed” demonstrates that Ms. Sebelius and the HHS may be intending for the rule to be legally binding and enforceable against insurance companies if they do not comply. Although it will ultimately depend on the actual language in the rule, the initial language demonstrates that the rule intends to be binding. Interestingly, it seems that at least some insurance companies are merely expecting “detailed guidance.”
Since the rule likely intends to be binding, it seems like the rule would require notice and comment rulemaking under APA §553. However, notice and comment rulemaking would most likely require more time than what Seblius is proposing in order to quickly insure children with pre-existing conditions by September. Considering that just the public comment period is 60 days and the cartoon of the steps required shown in class, it seems unlikely that notice and comment rulemaking would be completed for the rules to be effective in 6 months. The article mentions that the rules will be “issued soon” which implies that the rules will not be done through notice and comment rulemaking.
I think this demonstrates the issues that rulemaking process has become more ossified and burdensome. In terms of efficiency, the rulemaking process with notice and comments does not permit agencies to quickly address issues like this. To ensure that the rules would be legally binding on the insurance companies, the long and expensive process of rulemaking or a time-consuming “legislative fix,” as noted in the article, may be necessary. When there is intent by Congress and some ambiguity under the passed legislation, it seems logical that the agency would be able to quickly resolve this issue, especially considering children’s lives are at stake.
Although there is a strong argument that there should be a good cause exemption to quickly insure these sick children that need treatment, I still think note and comment rulemaking would be required because notice and comment rulemaking would not be “impracticable, unnecessary, or contrary to public interest.” Rather, this is a very controversial rule that would generate a large number of comments.
This article made me wonder if the regulated industry in this case can waive the APA §553 requirements. While the notice and comment period allows for different views to be heard, here it seems all parties have already agreed to follow these soon-to-be-issued rules. Specifically, the article indicates the insurance industry will not challenge these rules: “Insurers said they would accept the administration’s reading of the law, even if they did not fully agree with it, because they wanted to avoid a showdown over the politically explosive issue of health insurance for sick children.” And who else would have anything negative to say about these rules? Clearly not the parents or children, and hopefully not the medical community. As the insurers themselves pointed out, this issue is too explosive for anyone to challenge the propriety of a fix. And if anyone is brave enough to challenge these rules, even on procedural grounds, I wonder if the agency can simply argue the notice and comment requirement was waived.
Though the last line of the article states that a spokesperson hopes that this new regulation will clear up any ambiguity, it seems to only incur more confusion. Not only is it unclear as to when the insurance agencies are mandated to provide insurance to children with pre-existing conditions (September is the bill date, but the article states the “intent” is for it to go into effect this year as soon as possible), it is also unclear how exactly it will be implemented and if there will still be gaping exceptions.
Like the previous comments, it seems that this would have been a regulation where not only public comment would have been helpful, but also necessary in order to promulgate a rule that would be actually helpful. Further, while “sick kids” have a powerful pull, the cost of implementing this legislation by requiring the insurance agencies to insure an undetermined new amount of children may harm the families further by driving up premiums. These are concerns that would merit a public comment period.
Because this does not seem to meet a “good cause” exception, it seems the rulemaking process should not have been bypassed.
Don’t overthink this. And think further back than our last few classes. There’s no reason to suspect HHS will try to bypass notice and comment rulemaking under APA 553.
One issue that jumps out at me is the level of involvement of the executive branch in the agency’s decisions. While agencies derive their power from the legislatures, the executive branch nonetheless maintains some oversight. This article mentions the White House and President Obama several times, and it also explicitly states that some Democrats want Obama “to take a tough line” regarding whether insurance companies can raise the rates for children with pre-existing conditions. Even though this article doesn’t mention an executive order, it does mention a level of White House involvement. This seems to raise the issue over the increased executive control over agencies. It certainly is not surprising that the executive branch is involved in this issue, given that this was part of President Obama’s platform. Is this level of involvement appropriate? Given the controversial nature of health care reform, especially in Congress, executive oversight might be necessary for the reform to achieve its purpose.
It seems pretty clear to me that a notice and comment period is required because the agency is expected to promulgate binding rules. But even if the agency has a notice and comment period, I think there is opportunity her for the insurance companies to challenge those regulations. Considering that the agency does procedure “by the book,” it would seem to me that the challenge would be to substance. Especially considering Vermont Yankee, this might be the industry’s preferable route, although I know the standard is a difficult one to meet. Because of the vagueness of the statute, even admittedly, it seems that the industry could challenge the agency’s interpretation or even the vagueness of the statutes in providing guidance in the agency’s interpretation of the language in making rules. Although Chevron requires a lot of deference to the agency’s interpretation of the statute in making its rules, and they only need to have a reasonable interpretation, the vagueness of the language would seem to provide a loophole to challenge with.
I find the statement toward the middle of the article that the “real solution here is a legislative fix” to be particularly interesting. If the decision to be made is between the agency acting and not acting, or promulgating a guideline and not, it seems like the easiest thing to do would be for Congress to remedy the issue itself and either clarify the meaning of the bill as written or modify the bill itself. Depending on how you view the language, arguments seem to exist that it is both clear and not clear. Instead of the agency acting and subjecting itself to potential review, Congress should step in and fix the situation itself, particularly where you have what the article refers to as a “politically explosive issue of health insurance for sick children.”
It would be more efficient and cost-effective for Congress to either amend the bill or provide more clarification. Even if Congress does not do so, however, a regulation HHS promulgates would likely survive judicial review. Assuming HHS uses a notice and comment rulemaking process to promulgate the regulation, the Mead case suggests that a reviewing court would likely use the Chevron two-step test to review the reg. The first step of the test seems like it would be a slam dunk considering all the concerns expressed in the NY Times article about the vagueness and lack of clarity in the statute. If the court does agree that the statute is ambiguous, the regulation will just need to be a reasonable interpretation. Given the strong deference that be afforded to HHS’s interpretation of the statute under Chevron, the regulation would likely withstand judicial review. But again, the easier solution would just be to provide a “legislative fix.”
The major issue I see is that the statute allegedly does not clearly mandate that insurers “must” sell insurance to families with a child that has a “pre-existing condition.” Accordingly, the secretary of health and human services said this ambiguity would be addressed when the rules. Although there is substantial legislative reports strongly showing the intent of the Congress to provide, this leaves the agency with the job of insuring that this intent is reflected in the rules. However, once a new President comes into office those rules can be changed, which would leave families with such children without insurance coverage. Also, the alleged lack of clarity in the legislation may encourage certain health insurance providers to try circumventing the intent of Congress to obtain a competitive advantage, which would be to the detriment of insurance companies who choose to comply. The proper fix needs to be through a Congressional amendment to the existing legislation, which would ensure that children with pre-existing conditions will be able to obtain insurance in the future.
A notice and comment period would have been beneficial and there definitely needs to be an adequate definition of “pre-existing.” Parents and children should be able to voice there opinions, however, insurance companies will most likely be able to overcome them. I would think there could be some type of compromise between the two at some point. Instead of not covering anything that is “pre-existing” there could be an amendment made that some % of services for children with pre-existing conditions would be covered by insurance policies. It’s not fair to promulgate a rule that eliminates all coverage for a child’s certain condition just because they were diagnosed prior to their insurance benefits. Not sure if you heard this, but a man from Dallas was just arrested last week for threatening the Obama administration on Craigslist because of the health care reform he passed! Crazy…
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