Next week (March 2, 2015), the Supreme Court of the United States (SCOTUS) will take up a very important case – King versus Burwell. All politics and rhetoric aside, this case has the potential to virtually upend the Affordable Care Act (ACA), and stakeholders should be informed as to its implications. At the core of the case is whether or not the federal government has the authority to issue subsidies (or tax credits) to otherwise eligible individuals that reside in a state that does not have a “state based health insurance exchange” (emphasis on the word – state). Nearly three years ago, the SCOTUS rendered a decision addressing the constitutionality of the ACA…specifically the individual mandate. This time around, the SCOTUS will be interpreting specific language within the 2,700 pages of the law, and their determination could have a profound impact on the future of health care in America.
Like an elaborate structure or a line of dominoes, the ACA depends on many individual components or pieces fitting together to create an end result. To achieve the ACA’s primary goal of expanding access to…and insurance coverage for – health care – the law relies on three essential underpinnings:
1. Non-discrimination rules for insurers/plans: this means guaranteed issuance of coverage by insurers and employers, with no preclusion for so called pre-existing conditions;
2. The Individual Mandate: the requirement that with certain few exceptions, everyone MUST purchase/acquire health insurance, or face increasing fines levied by the Internal Revenue Service (IRS). This mandate (upheld by the SCOTUS in June of 2012) seeks to create a necessary balance of healthy and sick individuals in the insurance “pool”; and
3. Insurance Exchanges/Subsidies: for those that can’t access/acquire health insurance from an employer or the federal government (i.e, Medicare, Medicaid, VA), the law established marketplaces for buyers to shop for coverage. And for those in need of assistance to pay for coverage, the law provides subsidies in the form of tax credits, making the cost of coverage more affordable and attainable.
King v. Burwell is a case challenging the ability of the federal government to provide subsidies (see no. 3 above) in those states that do not have a STATE based health insurance exchange. The essence of this case rests on six (6) important words, firmly embedded in the ACA – “…an exchange established by the State”. The law stipulates that only residents of states having a STATE based health insurance exchange are eligible to receive subsidies to help pay for health insurance. And since 34 states originally opted to default to a federal (rather than state) exchange, the plaintiffs (represented by King) challenged the ability of the federal government to provide…and for otherwise eligible individuals to receive…subsidies in these states.
Should the SCOTUS rule in favor of the plaintiffs (King), the federal government would no longer be allowed to provide health insurance subsidies in the 34 states lacking a STATE based exchange. Of course the states could establish their own exchanges and thus, resume the flow of subsidies, but practically speaking, it would be challenging at best to pull this off. The reality is, without subsidies, the three (3) ACA underpinnings outlined above unravel. And, since the ACA’s employer mandate/shared responsibility provision is only triggered by the purchase of SUBSIDIZED coverage, a ruling in favor of the plaintiffs would render the employer mandate unenforceable.
Suffice it to say, a ruling in favor of King by the SCOTUS would eliminate subsidies (no. 3 above) in 34 states, which would profoundly affect the ability of nos. 1. and 2. above to survive/work, and in effect “kill” the employer mandate. A ruling in favor of Burwell would result in no effect on nos. 1., 2., and 3. above, so “business as usual”, and the continuation of the ACA’s roll out, including the eventual activation of provisions previously delayed.
So once again, we’ll be glued to our computers, devices and televisions this coming June, to find out what the SCOTUS decides will be the fate…of the ACA!