Good news for the residents of Puerto Rico, the U.S. Virgin Islands, Guam, et. al: according to a memo quietly posted on the HHS website last Thursday, Obamacare's coverage provisions no longer apply in these areas.
After a careful review of this situation and the relevant statutory language, HHS has determined that the new provisions of the PHS Act enacted in title I are appropriately governed by the definition of "state" set forth in that title, and therefore that these new provisions do not apply to the territories. This means that the following Affordable Care Act requirements will not apply to individual or group health insurance issuers in the U.S. territories: 1 guaranteed availability (Act section 2702), community rating (PHS Act section 2701), single risk pool (Affordable Care Act section 1312(c)), rate review (PHS Act section 2794), medical loss ratio (PHS Act section 2718), and essential health benefits (PHS Act section 2707). Specifically, under this interpretation, the definition of "state" set forth in the PHS Act will apply only to PHS Act requirements in place prior to the enactment of the Affordable Care Act, or subsequently enacted in legislation that does not include a separate definition of "state" (as the Affordable Care Act does).
Naturally, this is a complete 180 from the rhetoric espoused by the HHS last year. Under Obamacare, insurance companies operating in America's territories had to accept every insurance applicant, but residents of the territories were not subject to the individual mandate and did not have to actually purchase insurance while still healthy. Additionally, subsidies were not available to residents of territories; only for people living in the 50 states and the District of Columbia. As a result of the law, insurance companies threatened to stop selling new plans altogether in American territories.
When territory officials asked for government leniency last year, they were told that there was nothing possible to remedy this problem:
"HHS, at the request of and with full support from territories, confirmed the Affordable Care Act's market reform provisions that are incorporated into the PHS Act, including the guaranteed availability provision, are applicable to the territories," Center for Consumer Information and Insurance Oversight director Gary Cohen wrote in a July letter to territorial governors.
"However meritorious your request might be," Cohen continues, "HHS is not authorized to choose which provisions...might apply to the territories."
While it is certainly a good thing that the insurance market in these areas isn't going to be completely destroyed, it is somewhat troubling that the administration is continuing to pick and choose its definition of a state depending on the situation. Congress is supposed to write and change laws--not the Department of Health and Human Services.