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Supreme Court again holds key to future of Affordable Care Act: Preparing for the fallout
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From international law firm Arnold & Porter LLP comes a timely column that provides views on current regulatory and legislative topics that weigh on the minds of today’s physicians and health care executives.
In late June, the Supreme Court will issue a decision in the case of King v. Burwell. The key question before the Justices is whether consumers can receive tax credits, or premium subsidies, to buy health insurance in Exchanges run by the federal government.
The Affordable Care Act bases the tax credits on the cost of insurance bought on “an Exchange established by the State” and are not, plaintiffs argue, legal in states with federally facilitated Exchanges. Although this may sound like a distinction without a difference, the Court’s decision could have far-reaching impact on health care providers.
Jennifer B. Madsen
Hospitals, physicians and other providers all saw their Medicare payments cut by billions of dollars during the past 5 years, with the expectation that expanding health insurance coverage to all Americans would benefit them over the long run. However, King v. Burwell could nullify a substantial share of those (future) benefits without compensating for the (past) cuts.
The decision could have more immediate effects on patients. In 2015, the average monthly premium is $105 with the subsidy and $374 without. Legal scholars believe the subsidy payments would stop immediately (on July 1) if the Court rules to end them; further, the Court could require that the government retroactively collect premium subsidies that have already been paid.
Some states are asking health plans to submit two separate premium bids for 2016, based on the outcome. Plans will have until Aug. 25 to finalize their 2016 premiums. Health care providers may benefit from understanding how the two scenarios differ.
Three elements of the Affordable Care Act were designed to work together:
- insurance market reforms, such as guaranteed issue;
- personal responsibility, including the individual mandate enforced with a tax penalty; and
- premium subsidies for low-income individuals.
Without the other two parts, the insurance market reforms increase premiums and decrease access — the opposite of the law’s intent. But the decision in King v. Burwell creates this risk: the loss of premium subsidies may make coverage unaffordable for low-income individuals, and the decision would weaken the individual mandate, as there is an exemption to it if one cannot afford to buy insurance. Insurers would be required to guarantee issue and would set premiums high as a result; many low-risk and low-income individuals would not enroll.
In January, America’s Health Insurance Plans wrote to the Supreme Court that the insurance market reforms “would lead to unstable markets with fewer affordable options … than what was available before enactment” of the Affordable Care Act.
If the subsidies are struck down, an estimated 8.2 million people in 34 states will lose their insurance coverage, according to a study by the nonpartisan Urban Institute in Washington, DC. And although Congress and state legislatures could act in the future to expand insurance coverage through other mechanisms, those solutions could take years to emerge.
Jennifer B. Madsen, MPH, is Health Policy Advisor for Arnold & Porter LLP’s FDA and Healthcare practice group. She can be reached at Jen.Madsen@aporter.com.