What providers must know about the King v. Burwell decision

A Law Review Q&A

The media has painted King v. Burwell as a decisive clash of political titans: the Obama administration and its supporters on the one hand versus those who will stop at nothing to undo “Obamacare” on the other. Politically, the June 25, 2015 decision of the U.S. Supreme Court was very clearly a victory for the President’s administration and a decisive setback for those still trying to wedge the Affordable Care Act (ACA) off a legal cliff, but it by no means marks the end to the national debate over the ACA.

We spoke with Charles Harris and Matthew Jenkins of Hunton & Williams, LLP to discuss the King v. Burwell decision and its impact on providers now and in the future.

What issue was at the center of this case?

In this case, these foes sparred over the seeming technicality of whether the ACA’s reference to “an exchange established state” in fact refers only to those health insurance exchanges established and run by state governments, or whether this phrase includes those exchanges facilitated by the federal government in the 34 states that did not establish their own state-run exchanges. In the balance were hundreds of millions of dollars of health insurance subsidies intended to assist individuals with household incomes between 100 and 400 percent of the federal poverty line in purchasing health insurance on these ACA established exchanges. Had the ACA’s opponents prevailed, these subsidies would have been unavailable to individuals purchasing insurance in the 36 federally facilitated health insurance exchanges, making health insurance unaffordable to many and exempting them from the ACA’s individual mandate. Many political and industry commentators feared that such a result could destabilize state insurance markets, pushing them into “death spirals” of rising premiums and declining coverage.

Instead, Chief Justice John Roberts, writing for the majority, found that the context and structure of the ACA compel the conclusion that the phrase “an exchange established by the state” includes both state-run and federally facilitated health insurance exchanges created under the ACA. Thus, the ACA’s three main pillars remain standing:  guaranteed issue and community rating requirements; the individual mandate to purchase health insurance; and subsidies to purchase insurance on the state-run and federally-facilitated exchanges.

How does this ruling impact the status quo?

Outside the political arena, this decision benefits those health care providers who are sustained by insurance claims for the provision of health care services. Upholding the ACA subsidies will do little, if anything, to change the present status quo. It merits examination, however, to consider what might have happened had the Supreme Court decided this question differently. Political opponents of the Obama administration would have, of course, crowed at their legal victory, but practically the opposite decision in King v. Burwell might have had wide ranging policy implications.

To assist individuals reliant upon the subsidies challenged in the suit and prop up insurance markets in the states with federally facilitated exchanges, Congressional Republicans promised to essentially continue such subsidies in the short term. Governors and legislatures in some states would have moved to establish state-run exchanges to ensure their citizens’ access to federal subsidies, but an opportunity for significant reform would have existed in the states that chose not to establish exchanges. Congressional Republicans advanced versions of an “Obamacare off-ramp,” whereby states without state-run exchanges would be exempt from the ACA coverage mandates; individuals without employer sponsored coverage buying health insurance on the open market would receive advance-able, refundable tax credits; and barriers to the purchase of health insurance across state lines would be removed.

Many conservative health care policy advocates also favored further devolving the responsibility for ensuring affordable coverage to the states. Under the “off-ramp” plan, without ACA coverage mandates that define what minimum level of coverage must be offered in plans offered for sale in the insurance marketplace, conservative health care policy advocates argue states and insurers would have a freer hand to craft policies, savings vehicles and insurance products to promote wiser health care spending and better health on the part of individuals purchasing insurance coverage. Further, they argue, enabling the purchase of insurance across state lines would promote greater competition both among insurers and states themselves.

What should providers be on the lookout for regarding this ruling as the 2016 election approaches?

Although the decision in King v. Burwell effectively retains the status quo of subsidized, regulated insurance marketplaces under the ACA, this episode is more a preview of the debate to come than an end to the national discussion about the ACA. Health care policy will figure prominently in the 2016 Republican primaries as the party tries to coalesce around a fix or alternative to the ACA, and the Democratic and Republican candidates, whomever they might be, will undoubtedly square off over “Obamacare” in the general election. A decision from the Supreme Court that struck down the provision of subsidies to individuals buying insurance on federally facilitated exchanges might have, however, provided an opportunity to preview alternative health care policies in advance of the 2016 election.

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