June 26, 2015

Supreme Court (Again) Throws the ACA a Lifeline, But Storms Continue to Brew

On June 25, 2015, the U.S. Supreme Court ruled in King v. Burwell that premium subsidies issued to limited-income consumers established by the Affordable Care Act (ACA) can continue flowing to consumers in the 34 federally run exchanges. The 6-3 decision protects subsidies and tax credits distributed to nearly 6.5 million consumers and prevents what would have likely been a massive disruption to many markets.

In the opinion authored by Chief Justice Roberts and joined by Justices Kennedy, Ginsburg, Breyer, Sotomayor and Kagan, the Court ruled that while the plaintiff’s contention that the clause “an exchange established by the states” limited subsidies to only state-run exchanges was strong, their overall analysis of the law’s structure did not suggest that subsidies should only apply to residents buying coverage on state-run exchanges despite the “inartful drafting.” In a sharply worded dissent authored by Justice Scalia and joined by Justices Thomas and Alito, Scalia argued that the majority opinion of the Court overstepped its boundaries and should have let Congress decide how to address the availability of tax credits. In alluding to the Court’s 2012 ruling that upheld the individual mandate by finding it a tax and invalidating the mandatory Medicaid expansion, Scalia wrote “We should start calling this law SCOTUScare.”

As a result of the Court’s decision, the federally-run exchanges will continue to operate as they do today, offering subsidies and tax credits to millions of consumers. This decision also means that the risk pool for the individual insurance market will not be destabilized as would have likely happened if millions of consumers were unable to afford coverage. Had the Court ruled against the use of subsidies in federally-run exchanges, healthier subsidized consumers would have likely left the federally-run exchanges far more than less healthy consumers — resulting in significant rate increases on those consumers continuing to be insured. The decision also protects health care stakeholders — insurers, providers, device and drug makers — that made specific investments based on the positive impact of the subsidies on the insurance market.

But King v. Burwell does not end the debate. Legal challenges continue, and there are numerous bills in Congress that would repeal or restructure significant parts of the ACA. Politically, this decision enables Republicans who remain opposed to the ACA to continue advocating for legislation to repeal the ACA without having to face the significant fallout from millions of impacted consumers, many of whom reside in Republican-dominated states. As the nation moves closer to the 2016 Presidential election, the post-decision political rhetoric suggests the ACA will likely continue to be a significant campaign issue and that Republicans will likely spotlight premium increases and other unpopular elements of the ACA in their messaging. But in the near-term, the decision means the Republicans can avoid an internal squabble as to how best to deal with a newly unsubsidized population.

Across all health insurance exchanges, preliminary data suggests rate increases in 2016 will be higher than 2015, and recent studies suggest that high cost sharing in some plans may be dissuading the insured from receiving necessary medical services.” Also, a number of the state-run exchanges face significant financial challenges in the near term as federal startup funding dwindles. Some will need to reconfigure or rely on the federal architecture to survive. All of this suggests that while King v. Burwell represents another significant judicial victory for supporters of the ACA, the law’s ultimate impact in reforming health care access and quality in the United States is far from settled.

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