Why Guam played a role the federal court decision against Obamacare

A while back I wrote a story about the weird way that Obamacare effected the American territories, essentially wreaking total havoc on the the insurance markets of Guam and others.

Today, that story turned up among the many pieces of evidence cited in a federal court ruling against Obamacare, which ruled that subsidies should only be available in state-run insurance exchanges.

A weird quirk of the health care law made American territories like Guam and American Samoa subject to certain requirements but not others in way that was terrible for the insurance marketplace.

Health plans in the territories had to accept all customers, for example, but didn’t have any individual mandate or insurance subsidies. to lure the healthy people into signing up. This is pretty much a recipe for a death spiral: when the insurance market is open to everyone, but there are no incentives to sign up, its usually only the sick people who buy coverage.

In its ruling today, the District of Columbia Court of Appeals cited the situation in Guam to push back against a specific Obama administration argument: that there was no way that the health reform law intended for federally-run exchanges not to have subsidies, because that would throw insurance markets into such havoc.

If the health care law was drafted in a way that could throw insurance markets into havoc in the territories, the court reasoned, it made it a reasonable possibility that Obamacare could also do so in the situation with the subsidies at the heart of this ruling.

”The supposedly unthinkable scenario the government and dissent describe — one in which insurers in states with federal Exchanges remain subject to the community rating
and guaranteed issue requirements but lack a broad base of healthy customers to stabilize prices and avoid adverse selection — is exactly what the ACA enacts in such federal territories as the Northern Mariana Islands, where the Act imposes guaranteed issue and community rating requirements without an individual mandate,” Judge Thomas Griffith wrote.

In other words: if Obamacare expressly created a really messed up insurance market in the territories, a court can’t rule out the possibility that it would do so for state insurance markets.

In a complete coincidence, the Obama administration moved last week to fix the situation in the American territories, which you can read more about here.