King v Burwell What Employers Need to Know Part 1

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King v Burwell What Employers Need to Know Part 1
Calendar06 February 2015

Oral arguments to the Supreme Court for King v. Burwell are scheduled to begin March 4, and a decision is expected sometime in June. The ACA case focuses on four words in the law: “established by the state.” A literal reading of the law would seem to exclude subsidies for anyone enrolled in a public marketplace not “established by the state” — meaning the exchanges operated by the federal government in 34 states. Without subsidies, many currently enrolled in these states will not be able to afford health insurance.

Is this just a red-state issue?

Some of the 34 states using the federally facilitated exchange (FFE) have made progress in setting up their own exchanges and so would not be affected by a decision to roll back the government subsidy. While the enrollment period for the public exchange is still open and enrollment results are not yet final, two studies have estimated that the impact would be felt by about eight million people. The FFE states most likely to feel the biggest impact are Florida, Texas, North Carolina, Georgia, Michigan, and New Jersey.

Predictions?

The fact that the case is before the Supreme Court means that a minimum of four justices — the number that must vote to hear the case — are already giving serious consideration to restricting the subsidies to the FFE. Of the nine justices, four were appointed by a Democrat and five are Republican-appointed. In 2012, Chief Justice John Roberts sided with the four Democrats to uphold the constitutionality of the ACA. He is considered the most likely of the Republican-appointed justices to side with the Democrats, along with Associate Justice Anthony Kennedy. While some don’t believe that the high court will uphold the subsidy, keep in mind that three of the five lower federal courts ruling on the subsidy have upheld the IRS interpretation.

What are the possible fixes?

Neither the White House nor Health and Human Services Secretary Sylvia Mathews Burwell is speaking publically about contingent plans if the decision does not go their way. Here are some thoughts on what might happen.

  • The Administration could help states using the FFE set up their own exchange. This won’t be fast or easy. Time will be an issue if the decision is delivered in June with only a few months until open enrollment begins. In addition, that would involve convincing Republican governors and Republican-controlled state legislatures, all of whom have already refused to set up their own exchanges once, to cooperate.
  • Several health policy experts have said HHS could probably figure out a way to keep running most of the exchanges' technical systems, most likely as a contractor. The ACA sets certain rules for what an exchange has to do — such as certifying that insurance plans meet the law's standards, operating a program to help people navigate their coverage options, and covering its own administrative costs. But it doesn't specifically define what constitutes an exchange "established by the state." Most of the details were left to HHS. So, if HHS does end up needing to transfer federally run exchanges to the states, it could probably hang on to some of the work. But it would be difficult to argue that an exchange is state-run unless the state has taken some action to authorize the marketplace.
  • The White House could propose asking Congress to pass legislation to fix the problem with the wording in the law. This could get interesting, since the Republicans could then be blamed for not taking action to keep subsidies available to those enrolled. Will the Republicans do that? Their own constituents will be the most impacted if they do not act to save the subsidies.

Next week on Mercer/Signal: US Health Care Reform, Tracy Watts will discuss the consequences — both intended and unintended — of a decision to disallow federal subsidies for FFE coverage, including the potential impact on employers.

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