Analysts: States Should Brace for Supreme Court ACA Ruling

Decision on Subsidies in Federally Run Insurance Exchanges Expected This Month

June 10, 2015 02:33 pm Michael Laff Washington, D.C. –

Most states have not announced contingency plans if the U.S. Supreme Court invalidates a key component of the Patient Protection and Affordable Care Act (ACA) in a ruling expected this month, so states and Congress may have difficult decisions to make, analysts said at a recent roundtable discussion.

Michael Cannon, M.A., J.M., director of health policy at the Cato Institute, explains during a recent forum that language in the Patient Protection and Affordable Care Act made the law susceptible to a legal challenge.

The case, King v. Burwell, challenges the provision of subsidies for insurance premiums in states with health insurance exchanges run by the federal government rather than by the states themselves, subsidies that make the plans affordable for millions of Americans. The suit was triggered by the plaintiffs' refusal to accept subsidies because they did not want to be subject to a tax penalty tied to the individual mandate, which could reach $1,200.

Currently, the federal government is managing insurance exchanges in the 34 states that declined to establish their own. HHS has noted that if the subsidies on these exchanges are ruled invalid by the court, health insurance premiums will be too expensive for 6.4 million of the 7.3 million individuals who obtained insurance through the exchanges.

The AAFP signed on to an amicus curiae (friend-of-the-court) brief arguing that Congress intended to provide the subsidies regardless of who manages an insurance exchange at the state level.

Story highlights
  • Legal analysts at a recent Alliance for Health Reform roundtable discussed scenarios that could play out after the U.S. Supreme Court issues a ruling on health insurance subsidies provided under the Patient Protection and Affordable Care Act.
  • HHS said that eliminating subsides on the federal health exchange would make insurance premiums too expensive for 6.4 million individuals.
  • Two states, Delaware and Pennsylvania, announced that they will create their own exchanges if the court rules against the federal government.

During the June 5 roundtable hosted by the Alliance for Health Reform,( legal analysts discussed the scenarios that could play out after the court issues its ruling, which is expected by the end of June.

Simon Lazarus, senior counsel for the Constitutional Accountability Center, warned that if the subsidies are discontinued, many healthy people will choose not to purchase insurance because of the cost. Consequently, the delicate balance of pooling healthy and unhealthy individuals could very well be lost.

"That picture of chaos is not a scare tactic," said Lazarus. "You will have months and years of massive insurance market chaos."

Earlier this year, the Hospital Corporation of America, the nation's largest health care provider, sent an amicus brief( to the Supreme Court in support of the government's position to maintain the subsidies. The brief said the ACA is working as intended and that because of the changes, people are relying less on ER care. Lazarus mentioned the brief as a testament to the law's value.

"Given the opportunity to buy insurance with subsidies, a whole slew of people bought it," Lazarus said.

Opponents of the ACA argue that the law's language is so specific that it should not be ignored by the court. Michael Cannon, M.A., J.M., director of health policy at the Cato Institute, said the ACA clearly spelled out that a state-operated exchange -- for which subsidization of insurance premiums in the form of tax breaks is specified in the law -- is one established by state officials, not the federal government. Congress could have used a broader definition but did not, he noted.

When regulations were written as part of the implementation phase, Cannon continued, that specific language was omitted because federal officials knew it was vulnerable to differing legal interpretations.

"The facts of the case and the law are on the challenger's side," he said.

Cannon explained that the courts often side with federal government agencies in such disputes about implementing laws but added that the challengers in this case have prevailed in lower courts.

"If the government had a (strong) case, every court would have thrown this out," he said.

Lazarus said that if modifications are made to the ACA after the court's decision, opponents will continue to challenge it in court because their ultimate goal is to eliminate any government-sponsored health care program that leads to universal insurance coverage.

Little Time for States to Prepare

During oral arguments in the Supreme Court, the justices suggested that if they rule against the federal government, implementation could be delayed for several months to allow for changes at the state level. The panelists said that would not be enough time for either Congress or the states to make changes.

Dan Crippen, Ph.D., executive director of the National Governors Association, said most states are not rushing to create an alternative if the challenge prevails, although Delaware and Pennsylvania announced that they will create their own exchanges if the court rules against the federal government.

States that seek to create their own exchange in a short timeframe could use technology managed by other states, something that Connecticut and Kentucky elected to do. And Crippen suggested that states in the Northeast also could share a regional call center.

Although language in the law is a point of contention, the core element of subsidies to purchase insurance is generally popular among voters.

"People on both sides of the aisle like subsidies," said Robert Blendon, Sc.D., professor of health policy at the Harvard School of Public Health. "What they differ on is who should get them and how many."

If the law is overturned, the political fallout will be high, possibly for both parties, panelists agreed.

"If you are seen as uncaring in health care, you lose," Cannon said.