Health Insurance Report™ helps you track and analyze legal, legislative, and regulatory developments affecting the health-insurance industry throughout implementation of the Affordable Care Act...
By Sara Hansard
Oct. 29 — If courts rule that consumers can't receive coverage subsidies for Affordable Care Act insurance bought on the federal health insurance marketplace, the result would be similar to the state-by-state process of Medicaid expansion under the law, the head of a group that favors the ACA said Oct. 29.
“We're probably going to have the same dynamic that exists today with respect to expansion of the Medicaid program” if plaintiffs prevail in their legal challenge to the Internal Revenue Service rule allowing premium tax credits for consumers who buy coverage in the federally facilitated marketplace (FFM), said Ron Pollack, executive director of Families USA. Pollack said, however, that he doesn't believe the courts will rule in favor of the plaintiffs.
In 2014, the marketplaces in 36 states are run by the federal government rather than the states. Lawsuits challenging the IRS regulation are based on language in the ACA saying that the premium tax credits and cost-sharing reductions are to be provided to people whose plans were enrolled “through an exchange established by the State under section 1311 of the Patient Protection and Affordable Care Act.” The marketplaces are also known as exchanges.
Pollack made his comments at a teleconference at which three people from North Carolina and Indiana spoke about medical problems they and their families face. They said they would have difficulty retaining their ACA coverage if the subsidies were declared illegal. ACA marketplaces in those two states are run by the federal government.
With the U.S. Supreme Court's 2012 ACA decision, Medicaid expansion became an option rather than a mandate under the law. Twenty-seven states and the District of Columbia have opted to expand Medicaid so far, Pollack said. If legal challengers to the IRS rule prevail, he predicted “significant efforts” by ACA advocates to have states set up their own exchanges.
In a single day in July, two federal appeals courts issued different conclusions on the ACA subsidies in cases known as Halbig and King.
The justices of the Supreme Court met Oct. 31, at which time many thought they would decide whether to grant a petition of certiorari to hear the challenge. The Obama administration has argued that the review isn't necessary, and plaintiffs have asked the high court to hear the case.
Following that meeting, the Supreme Court Nov. 3 relisted a petition for certiorari in the case and said it will be reconsidered Nov. 7.
In many cases, convincing states to set up their own marketplaces under the ACA would likely be difficult, said Ian Millhiser, senior constitutional policy analyst for the Center for American Progress, who spoke during the teleconference. Many states' legislatures are “entrenched with Affordable Care Act opponents,” he said.
“It's not a good outcome if we just turn this over to the states and let them slowly acquiesce with the subsidies, because a lot of them are going to resist,” Millhiser said. “In the meantime, thousands of people are likely to die because they won't have access to insurance that they need to save their lives.”
If the courts declare subsidies issued through the FFM illegal, health insurance premiums could rise, and that could lead to a “death spiral” in which the insurance pool collapses, Millhiser said. “What starts to happen if the subsidies are cut off is a lot of well people, a lot of people who aren't sick, are going to suddenly decide that they can't afford or they don't want to get insurance because it's going to be much more expensive,” he said.
That would force insurance companies to raise premiums “dramatically” to make up for the loss of lower-cost healthy people, leading to a cycle of rising prices and fewer consumers, Millhiser said.
Under the ACA, people with income between 100 percent and 400 percent of the federal poverty level are eligible for the premium tax credits, and people with income between 100 percent of 250 percent of the poverty level are also eligible for cost-sharing reductions. According to a Department of Health and Human Services report released in May, 85 percent of ACA enrollees received financial assistance through the premium tax credit subsidies. About 5 million of the estimated 7.3 million people who are enrolled in ACA plans receive subsidies through the FFM.
The RAND Corp. released a study Oct. 21 finding that eliminating ACA subsidies for health insurance purchased by low- and moderate-income people on the marketplaces would increase premiums by 43.3 percent, reduce enrollment by 68 percent and result in 11.3 million people becoming uninsured.
Millhiser said the government is likely to prevail in the cases. The legal standard “is very favorable to the government,” he said. Plaintiffs must show that the law “can only be read the way they say it can be read,” he said. The government must only show “that their reading of the law is a plausible reading.”
In addition, the subsidy provision must be viewed in the context of the entire law, Millhiser said. “When you look at the law holistically, it's obvious that Congress intended the subsidies to apply in all 50 states.”
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