Insurers May Be Sued If They Accept Obamacare 'Fix'

Protection: Insurance for insurance. (National Journal)

If you like your health care plan, you can keep it — and sue the insurance company for selling it to you. At least, that's what some lawyers say.

In its attempt to let people keep their canceled health care policies, the White House has said some plans don't have to comply with certain Obamacare requirements for another year. But those requirements are still on the books, even if the White House isn't enforcing them.

Customers who buy uncanceled plans can still sue insurance companies for not meeting the law's standards, legal experts say.

"If I was an insurance company, I'd be very worried about this," said Jonathan Adler, a law professor at Case Western Reserve University, adding, "The law is still the law."

Some states and insurance carriers are already skeptical of Obama's proposal and unenthusiastic about going through the complicated process of uncanceling plans for just a year. The threat of lawsuits could be another reason for insurers to reject the White House's proposal.

Here's how it works: The health care law sets certain standards for all individual insurance plans. They have to cover a set of 10 "essential benefits," for example, and can't impose lifetime caps on coverage. Insurance companies have been canceling policies that don't meet those standards and don't qualify for the relatively narrow "grandfathering" exemption written into the law.

The cancellations caused such a political firestorm that the administration allowed insurance companies to uncancel their plans and sell them for another year. Insurers can keep selling policies that don't comply with all of the health care law, and the administration promised to look the other way.

But the standards plans have to meet are written into the law. So, the administration might not do anything about plans that don't meet the law's requirements, but a consumer could still sue his or her insurance company for selling a product that doesn't cover services it is legally required to cover.

"The fact that the law still says what it says has implications beyond the federal government's willingness to enforce it," Adler said.

Adler is a critic of the Affordable Care Act, but more-sympathetic legal experts share his view on potential lawsuits. Nicholas Bagley, a law professor at the University of Michigan, said insurers do appear, at first glance, to be at risk for litigation.

"I know enough to be able to say with some confidence that the insurers have reason to be worried," Bagley said.

This dynamic could change as the administration fleshes out its proposal. But its initial rollout didn't do anything to shield insurance companies, Adler said.

"An insurer who continues to provide a policy that does not comply with the ACA's requirements, and denies payment for an ACA-covered procedure in keeping with the policy, could be sued by the enrollee," said Chris Holt and Laura Collins, policy analysts at the conservative American Action Forum.

In press accounts and in a brief letter to state insurance regulators, the administration simply said it doesn't plan to enforce the health care law's requirements for certain policies. It didn't try to make the case that the law itself calls for a gradual transition to the new requirements.

That approach might at least give the administration's decision more weight if anyone does sue their insurer.

"I'm not sure that that would work," Adler said, "but that would raise different questions, and there would be a stronger argument there."