United States Supreme Court with Flag

On November 7, when the United States Supreme Court decided that it will hear the King v. Burwell case, the nation collectively gasped at the ramifications this hearing will bring to the reformed health market. [Side note: The Court will hear arguments on March 4, 2015] According to the King v. Burwell case, the Affordable Care Act’s language does not allow federal tax credits to be provided to people who bought health insurance from the federally facilitated marketplace. The 4.5 million people who bought insurance in 34 states, which utilized the federal exchange for their insurance needs are at the risk of losing the tax credits that connect these people to affordable health insurance.  However, that is not the only problem connected with this Supreme Court hearing.

Assuming that the United States Supreme Court decides that the federal exchange is not eligible to provide subsidies to people with insurance in those 34 states, what happens next? Logically, considering the amount of subsidies available to the states and people, most states will make a rush to have their health insurance exchange up and running before the Supreme Court ruling comes into effect. The general consensus is that the Court ruling will be announced in June/July timeframe. To support this movement from all these states, the HHS might allow some relaxation in rules about the establishment of the exchanges. By the time the Supreme Court passes this ruling, the states will still be a little late for meeting the 6.5 month conditional approval requirement before state exchange launch. Agreed, the HHS might relax these deadlines a bit, but it would still mean a lot of overhead for these states.

While considering that, let’s not forget that some of these states could not get their health insurance exchange up and running in the years they had before the rollout of ACA. Another more probable case would be states beginning their health exchange establishment plans, which could take somewhere around 6 months. What happens in these 6 months? Complete chaos. When the subsidies are dropped, some of the people with health insurance might not be able to pay their health insurance premiums. Due to nonpayment of premiums, most of them will stand to lose their health insurance in 30 days at the most. The health insurance plans will lose these customers and the subsequent market share. The people who retain their health insurance post this would be the ones who most need the health insurance. Naturally, with sicker, unhealthier people in the pools, health plans will run the risk of higher losses and lower profitability in the market. In an already competitive market, not every health plan will be able to bear the brunt of this onslaught, and some of them might succumb, leading to a destabilization of the insurance market. It will be likely the lose of subsidies will not immediate as that will render the market unstable.

Other than these, there is another parallel thread running along. It’s not yet certain whether a state with an outer shell that utilizes the functionality of healthcare.gov internally qualifies as a state established exchange, and the HHS plans to make use of this. In 7 states, the HHS is planning to recognize the partnership exchanges, exchanges which are managed by the State but run jointly with the federal government, as state-based exchanges that are eligible for providing tax credits to enrollees. However this partnership would only makes really help the 7 states, the remaining 27 states are still nonplussed about how to proceed.

And then there is the case of ‘state innovation waivers’. Under these waivers, if a state offers similar, affordable coverage under an alternate plan, they are allowed to circumvent a few primary ACA requirements, such as having an exchange or offering premium tax credits, without losing the federal funding they are eligible for under the ACA. However, the concept of waivers does not kick in before 2017, and until then, the residents of these states will be in a coverage gap without any premium tax credits for residents, assuming that the challengers win the case.

Ultimately, amid all these threads and ideas, the Obama administration, the health plans, and the state authorities are in a state of clamor without any certainty of their future. In case the challengers in King v. Burwell win, it could mean a whole lot of consequential changes for Obamacare that could ultimately rob it of its potency.  It is definitely going to be interesting to watch!

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