With a SCOTUS (Washington-speak for Supreme Court of the United States) decision expected in King v. Burwell by the end of the month, policymakers are under significant pressure to respond to the potential consequence resulting from a ruling for King—namely sweeping changes to subsidy eligibility, and resultantly, those subject to the individual mandate. Despite the significance of the case in determining the future of the ACA, a recent poll indicated only 16% of Americans had been following the case closely, as of April 2015.
With congressional and state policymakers still without a contingency plan should the ruling stand for King, the need for Health Centers and their stakeholders to understand the case and its potential consequence is growing ever more significant. This is the first in a series of posts that will examine the case, its implications for health centers and the health care system, and what contingency plans (or lack thereof) policymakers have been discussing should the court invalidate the subsidies.
What is King v. Burwell?
In brief, the case will rule whether Federally-facilitated marketplaces (FFMs)—formerly known as “exchanges”—can offer subsidies to individuals purchasing health insurance outside of State-established marketplaces. The King v. Burwell debate hinges heavily on four words in Section 1401(b)(2)(A) of the ACA: “established by a State.” In 2013, the IRS ruled that premium subsidies apply to all financially eligible Americans, regardless of whether their marketplaces were established by the state or the federal government. King v. Burwell questions the authority of the IRS to deem FFMs eligible for subsidies—in lieu of the original wording of Section 1401 (b)(2)(A). A ruling in favor of King would effectively end premium subsidies for nearly 6.4 million individuals in 34 states currently operating under FFMs—unless States or Congress proactively develop regulatory “fixes” to the subsidies issue.
Who are the actors?
The plaintiffs, representing four individuals from Virginia, are challenging the federal subsidies on the grounds that the subsidies unjustly affect their unaffordability exemption from the individual mandate. In the absence of federal subsidies, the plaintiffs would be exempt from the individual mandate taxes, due to their low annual income; however, with the subsidies available to them through their state’s FFM, the plaintiffs are required to comply with the mandate. The plaintiffs argue that the subsidies they are receiving through Virginia’s FFM are illegal on the grounds that State-established marketplaces alone are entitled to subsidies—not FFMs. The plaintiffs applied an original meaning constitutional interpretation to Section 1401 (b)(2)(A) of the ACA, claiming subsidies are only available to individuals who enroll in healthcare plans in “Exchanges established by a State”—reasoning those individuals in the 34 FFMs are ineligible for federal subsidies.
In contrast, the defendants, representing the IRS, Treasury, and HHS, argue in favor of the original intent of the law—i.e. that the ACA intends both FFMs and state-established marketplaces to utilize subsidies for financially qualified taxpayers. The defendants have directed the debate towards Section 1321 (c)(1)(B) of the ACA, which stipulates that in the absence of a State-established exchange, the HHS Secretary can “establish and operate such Exchange within the State.” Whether “such Exchange” includes the subsidies available to the previously defined exchanges “established by a State” is under scrutiny.
What King v. Burwell is not?
The case will not undo all aspects of the ACA. Following a decision, insurance companies would still not be allowed to deny services to or raise premiums for those with a pre-existing condition. States with state-established marketplaces will continue to receive federal subsidies. Funding that was originally included in the ACA for Health Centers and other important programs is not at risk. However, due to the damaging financial strain the decision would place on individuals and states newly without subsidies, the decision could likely act as a catalyst to repeal other aspects of the ACA, potentially dismantling the law over time.
What will the ruling come down to?
The ruling will ultimately be decided by whether the SCOTUS adopts an original intent or original meaning constitutional interpretation of the law. If the section under scrutiny is understood within the larger context of the ACA, we can expect a ruling in favor of the defendants, meaning subsidies will stay in place. A ruling favoring the original meaning, in contrast, will follow the law precisely as it was written—upholding that marketplaces established by a State are to be the exclusive recipients of federal subsides.
If the SCOTUS rules the ACA is not explicitly clear in authorizing subsidies to FFMs, the decision will then hinge on whether the IRS has the legal authority to interpret the ACA as it did in its 2013 regulation granting subsidies to all marketplaces.
Regardless of the decision, the case will likely cause shifts in the insurance marketplaces as we know them, with many states already developing plans to protect their subsidies from expiring. In our next blog, we will delve deeper into this topic by highlighting the actions (or contrasting inaction) individual states and Congress are taking in preparation for the ruling.
Up Next: King v. Burwell: What States and Congress are Doing Now to Prepare