Last week on Mercer/Signal: US Health Care Reform, Tracy Watts explained the King v. Burwell case that will be heard by the Supreme Court starting next month, including possible fixes. Today, she discusses the consequences — both intended and unintended — of a decision to disallow federal subsidies for federally facilitated exchange (FFE) coverage, including the potential impact on employers.
In what could be a long list of consequences if the Supreme Court disallows federal subsidies for FFE coverage as a result of the King v. Burwell case, the biggest is a huge increase in the number of uninsured from the number today. The estimated 8 million people currently getting subsidized coverage in a FFE only foot 24% of the cost, on average, with the federal government picking up the rest. Without the subsidy they will most likely not be able to afford coverage. Here are a few of the consequences of most concern to employers:
- More people will be exempt from the individual mandate. Lack of access to affordable coverage (coverage costing no more than 8% of household income) excuses an individual from the individual mandate. The Kaiser Family Foundation estimates that without subsidized premiums, 83% of those in FFE states formerly eligible for subsidies would qualify for an affordability exemption from the individual mandate. Currently, an estimated 3% qualify for an exemption. That means the government will be paying out less in subsidies, but will also be collecting less in individual mandate penalties.
- The FFE individual health insurance options are not likely to survive the impact of anti-selection within a much smaller risk pool that would occur if subsidies are eliminated. This will cause insurers to exit the individual market in the FFE states, and there could be a trickle effect on the state-run exchanges as well.
- Repeal of the subsidy for FFE states could have an impact on employer strategies that leverage public options for hourly employees working less than 30 hours and for pre-Medicare-eligible retirees.
- The repeal of the subsidies doesn’t necessarily give employers an “out” in terms of the shared responsibility penalties in states where employees can’t obtain subsidized coverage. If an employer has employees in non-FFE states, the population considered in the offer of coverage to “substantially all employees” is the entire employee population, regardless of type of public exchange option.
- One of rationales for expanding coverage to more Americans was that a reduction in uncompensated care for the uninsured would help keep health insurance premiums lower for all. It is estimated that uncompensated care increases family premiums by as much as $1,000 a year.
What does the public think?
Surveys indicate that this case is not on most American’s radar screens. In a poll taken by the Kaiser Family Foundation, more than half surveyed (56%) say they have heard nothing about the case. Since the law was passed in 2010, more people view it unfavorably than favorably. Still, only 32% of those surveyed by Kaiser would like Congress to repeal the law entirely, although another 14% want the law scaled back. On the other hand, 23% say they want to see Congress expand the law and 19% want it to move forward as is. Not surprisingly, opinion is sharply divided by political party.
Additionally, when asked what will happen with the law in this Republican-led Congress, 31% believe the law will undergo a major change and 32% believe it will see only minor change. Just 12% believe it will be repealed entirely. Most see lawmakers' proposals to change the ACA as an attempt to gain political advantage (63%) rather than to improve the law itself (29%). Large majorities of Democrats and independents feel this way, while Republicans are divided.
What should employers do?
Employers have planned for ACA compliance since the law was passed in 2010. All along the way we have been challenged by the complexity of the law, zig-zagged to accommodate changes and delays, and digested regulatory guidance that has not always been timely or easy to understand. There have been political battles and attempts to derail the law. Some held out hope that a prior Supreme Court decision or the mid-term elections would bring about major changes, even repeal. So here we are — again. Even if the Supreme Court strikes down FFE subsidies, all other ACA provisions remain in place. Our best advice? Assume the law will remain essentially intact until we know otherwise, and keep doing what you’re doing.