Supreme Court, New Congress May Spark Political Clashes, New Exchange Model

Reprinted from INSIDE HEALTH INSURANCE EXCHANGES, a hard-hitting newsletter with news and strategic insights on the development and operation of public and private exchanges.

By Steve Davis, Managing Editor

November 13, 2014 Volume 4 Issue 22

A Congress soon to be led by a party opposed to the Affordable Care Act (ACA) — combined with the Supreme Court’s recent decision to take on a controversial provision of the law — could give federally facilitated exchange (FFE) states a strong financial incentive to transition to a “supported state-based marketplace” model (HEX 9/4/14, p. 1). It also could lead to some political battles and bargaining with the White House.

In its July 22 ruling on Halbig v. Burwell, a Republican-majority panel of the U.S. Court of Appeals for the D.C. Circuit ruled 2-1 that the premium subsidies awarded to 4.7 million enrollees on HealthCare.gov were illegal because the wording of the ACA indicates that only exchanges set up by states can issue subsidies (HEX 7/31/14, p. 1). On the same day, a Democrat-majority panel of the U.S. Court of Appeals for the 4th Circuit in Richmond, Va., determined in King v. Burwell that the subsidies were legal. The Supreme Court said on Nov. 7 that it would take up King v. Burwell (14-114) during its current session.

Regardless of the ACA’s intent, it’s likely the high court will rely on a literal reading of the statute, which says federal subsidies are available only through state-run exchanges, industry observers tell HEX. The 34 FFE states would then be ineligible to distribute federal subsidies to enrollees, disrupting insurance markets and making coverage unaffordable for many low-income people. Such a decision would bounce the ball back in Congress’ court to rework the language. But a congressional fix is highly unlikely in a Republican-majority Congress with an election year on the horizon.

Politics Could Rattle Exchanges

Barring FFEs from distributing subsidies would dramatically disrupt the exchanges, create a very contentious 2016 election period, and raise the specter of a possible “do over” on health reform, suggests William Pewen, Ph.D., who served as senior health policy advisor to former Sen. Olympia Snowe (R-Maine). He is now an assistant professor of public health and family medicine at Marshall University in West Virginia.

“The Court may decide that bad drafting trumps intent, and given a new majority in Congress with a history of disengagement on meaningful health reform, the prospect of a legislative remedy seems dismal,” he tells HEX. “In that case, more governors and state legislators would face a critical decision: Does one sacrifice constituents’ access to health care in the pursuit of a partisan conflict?”

FFEs Could Sidestep Problem

In response, CMS might issue guidance clarifying that a state can designate HealthCare.gov as its IT platform, says Christopher Condeluci, a principal at CC Law & Policy in Washington, D.C., who was on the Senate Finance Committee when the health reform legislation was being drafted. “This will then allow governors to sign an executive order establishing a state-based exchange,” he predicts. “I think this happens in most states. There will be some outliers, but not many.”

For the 2015 plan year, Oregon will rely on a Supported State-Based Marketplace (HEX 9/4/14, p. 1). Last year, Idaho and New Mexico operated their marketplaces while relying on the federal technology platform. Both states are considered SBEs. The model allows states to tap existing federal IT systems while maintaining policymaking authority over other issues such as plan certification, insurer participation and fees, marketing, and consumer engagement, according to a recent Commonwealth Fund issue brief co-authored by Kevin Lucia, a research professor and project director at Georgetown University’s Health Policy Institute (HEX 9/4/14, p. 1).

Mark Hall, a professor of law and public health at Wake Forest University, agrees that many FFE states probably would be willing to endorse the federal website as their exchange to ensure that their constituents don’t lose the main benefits of the ACA, and to avoid hurting their existing individual health insurance markets, he adds. Without such a model change, carriers in FFE states would face “a major threat to the sustainability of the individual markets,” Hall says. And that would likely hit local and regional carriers, such as Blue Cross and Blue Shield plans, the hardest. National carriers would have the flexibility to leave nonviable markets, he adds.

Although politics kept many Republican governors from accepting federal money to expand Medicaid, Hall says “the politics of private insurance subsidies for the middle class are distinctly different.” However, the possibility that millions of Americans could lose federal subsidies and health coverage would give Republicans some bargaining power with the White House to accept a congressional fix that includes major revisions to the ACA.

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