Any day now, the Supreme Court is expected to issue its ruling in King vs. Burwell, a case that could unravel parts of the Affordable Care Act. Many are speculating about implications the ruling will have, both for health care reform specifically and legal precedents generally. For example, would a ruling in favor of the government give the IRS new power to tax and subsidize outside of clear legislative intent?
For the health care consumer, following are the three most practical questions to ask once the court issues its ruling:
1. Do people get to keep their subsidies?
Under health care reform, individuals and families can receive government subsidies to help purchase individual health insurance. In some cases, these subsidies cover the entire cost of the insurance premium.
The plaintiffs in the King vs. Burwell case dispute the legality of these subsidies for citizens of states that did not establish their own state exchange. Why? Because the law is very specific about subsidies being available only if a state sets up and maintains its own state exchange, but doesn’t say anything about subsidies being available if a state does not do so and pushes that responsibility to the federal government.
As a result, the first question to ask in wake of the ruling is whether people get to keep the subsidies they currently receive.
2. If people lose their subsidies, when and how does that happen?
If people lose their subsidies, the next question is when and how does that happen. The most onerous approach would be to say that the subsidies were always illegal, and therefore the government must recoup the subsidies already paid to citizens. This is extremely unlikely because of how punitive the effect would be on people who had no idea that they were receiving a subsidy that could one day be ruled illegal.
In fact, it’s even unlikely that the court would rule that subsidies for these individuals will end from the date of the ruling going forward. A loss of subsidies would mean that the millions of Americans who purchased health insurance from the federal health exchange may drop their plans, which would have extremely negative effects on the insurance markets. Instead, the court will likely say that subsidies will no longer be available for citizens of states without a state health exchange starting at some date in the future, such as Jan. 1, 2016.
Waiting until 2016 to enforce the new ruling would have a few advantages. One is that it would give states some time to decide if they want to go ahead and set up their own exchanges so their citizens can receive subsidies. Another is that it would allow insurance companies time to adjust their enrollment expectations for 2016.
3. If individuals lose their subsidies, do employers still have to pay penalties?
At first blush, King vs. Burwell seems to pertain only to individuals. But employers have a dog in this fight, too. Many employers are liable for penalties — but only if their employees receive subsidies. If the court rules that individuals and families can’t get subsidies, then it should follow that employers won’t have to pay penalties.
This fact is often ignored. It will come into sharp focus, however, if the court rules that people in states that do not have a state exchange can’t receive subsidies. If that happens, lobbying will immediately ensue for those states to go ahead and set up state health insurance exchanges. That part is obvious.
What isn’t as obvious is that an equally strong lobbying effort may ensue in some states to maintain the status quo and not set up a state exchange. Who would take up this effort, and be in favor of people not being able to receive subsidies? Interest groups whose objective is to help ensure their state is business-friendly. Many states, including Tennessee, did not expand Medicaid even though there was no obvious penalty to businesses for doing so. In this case, there would be a direct cause-and-effect: Allowing citizens to receive subsidies subjects employers to penalties.
As a healthcare consumer, it can prove valuable to understand how and why the health care landscape is subject to this kind of constant change and uncertainty.
Alex Tolbert is the founder of Bernard Health, a company that provides expert advice on health, Medicare and COBRA insurance and medical bill consulting.
Date: June 17, 2015