Kansas State University


Issues in Health Reform

Month: June 2015

The SCOTUS has ruled on tax subsidies: What does this mean and can we now move on to fixing things?

On June 25, 2015 the Supreme Court of the United States ruled to uphold the health law tax subsidies. (Here is full ruling) One might easily say all is as it was before the ruling. That is, in the new marketplaces of insurance that began in January 2014 because of the Affordable Care Act, things would continue as they were. Anyone who was eligible to receive a tax subsidy and had been receiving those subsidies for assistance in paying for insurance purchases through those marketplaces would continue to do so. The threat had been to consumers in the almost 3 dozen states (34) where the federal government was facilitating their marketplaces. The ruling for those subsidies to continue for all allows implementation in a “more certain and predictable environment for the health care industry, states, and consumers.” (WSJ)

Over 11 million previously uninsured Americans are now insured (Kaiser Family Foundation). Approximately 80% of those enrolled in marketplace plans (some previously insureds included) are receiving financial assistance (Kaiser Family Foundation in JAMA). Tax credits to help pay premiums for those plans are available to those with income less than 400% federal poverty level (FPL) ($97,000 family of 4). Those with incomes less than 250% FPL ($60,625 family of 4) qualify for additional assistance in paying out of pocket expenses. That financial assistance to an estimated 6.4 million was what was in jeopardy.

If you are looking for a good resource showing a state-by state effect with a map to accompany it (showing numbers of potential lives that were affected and the amount of dollars at stake), see this Kaiser Family Foundation brief.

Others have well described the intricacies of the ruling discussing such issues as why the 6 justices who ruled in favor of the administration thought it was important to see the law in its full context. There were 3 fairly strongly worded descents and there are many who continue to see this ruling as a political decision. Conservative media were outraged though I was surprised to see even Fox News op ed piece by a physician/health care executive focusing on trying to improve health by giving access to care.

Here are some words representing opposing and supportive views,

  • Brookings Brief that explains well the ruling and talks about upcoming challenges.
  •  Washington Post article was accepting of the ruling and includes a video on what you need to know about it.
  • In this National Journal piece the focus was on the argument of one of the most vocal dissenters, Justice Scalia.
  • CBS summed up the Republican point of view in this article.
  • Media Matters for America focused on balancing the conservative media reactions.

What I would like to point out is:

  1.  I’ve been surprised that I’ve not seen talk about what state marketplaces really are. In fact, whether facilitated by the feds or or in partnership with the feds, operated solely by a state all marketplaces are state based. They include insurers who offer policies specific to that state’s population and only a particular states’ residents can buy those policies. The insurers had to get approval from the states’ insurance commissioners offices to offer insurance products in those states. Yes, in the federally facilitated exchanges the feds had to do a lot of the work, especially the website aspects, but all state insurance offices were fully engaged in the discussions with the insurers.
  2. That we have spent a lot of time and energy worrying over the potential implication of a ruling that would have been detrimental to residents of those living in federally facilitated exchanges/marketplaces states. Given the particular wording in the decision, that is up to the SCOTUS to sort this out, this aspect can’t go back to Congress, though other parts could and I suspect might. As this aspect of the national conversation is put to rest, others may arise.
  3. Even those who believed the contested language referring to state Exchanges was precise–written with the intent to push states toward setting up their own exchanges else their residents would be ineligible for those tax subsidies (a major stick approach)– understood that major turmoil would ensue if 6+ million or so newly insured were suddenly in jeopardy of having that insurance become unaffordable again.

There are many who now say that with this latest legal challenge behind us, the focus can be on improving the law, and these suggested improvements are from both supporters and non.

  •  For a perspective on not “surrendering” but block granting ACA instead see US News and Forbes
  • See the Wall Street Journal for a perspective on how the ruling raises the bar for Obamacare opponents, basically requiring political movement to improve on the perceived failings of the law.
  • See the National Center for Policy Analysis for more specific changes the author believes would improve the insurance aspects of the law
  • For a list of possible improvements, including improving the value of the care we receive (see Health Affairs)
  • For an understanding of ongoing challenges such as the costs of the subsidies (and the price of health care in general), see The Hill.

And there are still some who prefer a single payer for all system, an expansion of Medicare. Some of us recall that the reason we got the ACA from a Democratic President is that Obama believed an expansion of the private insurance industry would garner bipartisan support. We’ve seen all too clearly through the years with a law that passed with not one Republican legislator supporting, through dozens of repeal attempts, that that bipartisanship did not materialize. Check out this Huffington Post site for a collection of essays on the perspective of Medicare for All.


Countdown to Supreme Court Decision about ACA Tax Subsidies

By the end of June 2015 the Supreme Court of the United States will hand down their decision in King v Burwell that will impact around 8 million Americans who are currently receiving tax subsidies to help pay insurance premiums for policies they have bought in their state marketplaces.  Either those 8 million will sleep easily knowing that all is as it was and they will continue to get help paying for their subsidies OR they may be quite a bit more agitated with lots of unknowns.

The issue is whether or not the language of the Affordable Care Act (aka Obamacare) that permits subsidies for residents only in those in states running their own Exchanges/marketplaces is the way the law must be interpreted and enacted OR if the intent was indeed broader.

In a large sense all of the Exchanges/marketplaces are “state” Exchanges since the insurance policies approved for sale in those are set up for each state specifically.  The sticking point is that some states (34 of them) had the federal government facilitate the operation of their marketplaces.  Those are called “federally-facilitated” exchanges/marketplaces and are considered, by the challengers, to be non-state marketplaces.

The challenge about the wording has been an attempt to gut one of the main provisions of the law that makes insurance policies offered in those Exchanges/marketplaces more affordable.  In some cases, it is very much more affordable with individuals near 138% federal poverty line ($16,242 for one in 2015) paying ~$20/month for a policy.

Depending on whom you ask the law’s reference to state Exchanges 1) was sloppy wording, but seen in context of the whole law, could not have intended to cut off from subsidies residents of states not operating their own Exchanges OR 2) the intent was not to give subsidies to states not operating their own Exchanges, perhaps as an incentive to get the states to operate their own Exchanges.  The SC Justices are either going to assume the language was sloppy within the full context of the law thereby allowing the subsidies to exist in all states OR they will be true to the language of the law and say: if Congress intended subsidies to be for residents of all states then Congress has to fix the wording.  There exists concern that Congress is not in any position to agree upon new wording.  Certainly, there are many legislators who would welcome the damage a ruling in favor of the plaintiffs would do to the ACA.  However, since those directly impacted negatively would be residents of many states, and these are their legislators, some are looking to temporary fixes including:

  • extending the tax subsidies through the end of the year so there would be less disruption (this would leave no good alternative for affordable policies going forward), and
  • Governors are considering taking on the responsibility of running their own Exchanges (but this is a huge undertaking, as evidenced by the fact that some states tried and decided to let the federal government takeover: e.g. Maryland)

I spoke to this issue on Nov 19, 2014 and in depth in a July 22, 2014 post when the issue about ACA tax subsidies was just heating up with circuit and district court rulings.  The specifics remain relevant.

How do American’s feel and what do they understand about this judicial case?  “A brand spanking new Kaiser Family Foundation poll finds a broad majority of Americans wants Congress to pass a law to make subsidies available in all states if the Supreme Court guts them…about 6 in 10 (63 percent) say Congress should pass a law so that people in all states can be eligible for financial help from the government while about a quarter (26 percent) say Congress should not act on the issue.” (Washington Post, Sargent, June 16, 2015).