Media Center
The U.S. Supreme Court’s ruling in King v. Burwell, issued June 25, 2015, allows federal premium tax credit (subsidies) to continue for enrollees in BOTH federal and state-based health insurance exchanges. This highly anticipated decision hinged on statutory language of the Affordable Care Act (ACA), which is written to provide subsidies in exchanges “established by the state.” In this 6-3 decision, the Supreme Court following the legislative intent within the broader context of the ACA; therefore, subsidy availability will continue in the 34 states utilizing federally-facilitated exchanges (Healthcare.gov) today.
How does this Ruling Impact Employers, Employees and all Consumers? The ruling does not impact the legal status of the law and ACA implementation is unchanged. Employers and consumers have faced uncertainty in advance of the ruling, and this lack of predictability limits sound business planning and decision-making.
Background
When the ACA became law in March 2010, the intent was to provide an incentive for states to establish state-based exchanges. When this did not occur, Healthcare.gov became a larger health insurance exchange than initially anticipated. Despite the larger role of the Federal government in building Healthcare.gov, the high court ruled not to parse language and thereby create greater uncertainty for Americans. A longstanding pillar of the ACA is to expand health insurance access and within this context, the Supreme Court ruling results in consistency rather than state-by-state variances.
Majority Opinion in King v. Burwell
Chief Justice John Roberts wrote the majority opinion for the Court; Justices Kennedy, Ginsburg, Breyer, Sotomayor and Kagan joined that opinion. The court concludes that the text of the ACA is ambiguous, noting, “the Act does not reflect the type of care and deliberation that one might expect of such significant legislation.” Despite ambiguity in the ACA statute, however, the court majority held the structure of the ACA requires subsidy access in both state-based and federally facilitated exchanges. To hold otherwise would create insurance market “death spirals” in states with federally facilitated exchanges. According to the majority opinion, “Congress passed the Affordable Care Act to improve health insurance markets, not destroy them [and] we must interpret the Act in a way that is consistent with the former and avoids the latter.” In short, the ruling protects subsidies for approximately 6.4 million Americans currently relying on Healthcare.gov, which, on average, are $272 per month per enrollee. Access to subsidies will not vary by state.
Minority Opinion in King v. Burwell
Justice Antonin Scalia wrote a fiery dissent in the King v. Burwell decision. Scalia is known for his outspoken conservative views and his sharp pen, and his minority opinion reflects an extremely passionate disagreement with the majority opinion. In his dissent, he writes, “The Court’s decision reflects the philosophy that judges should endure whatever interpretive distortions it takes in order to correct a supposed flaw in the statutory machinery. That philosophy ignores the American people’s decision to give Congress ‘all legislative Powers’ enumerated in the Constitution. They made Congress, not this Court, responsible for both making laws and mending them.” Additionally, he adds, “We should start calling this law ‘SCOTUScare’ … This Court’s two decisions on the Act will surely be remembered through the years … And the cases will publish forever the discouraging truth that the Supreme Court of the United States favors some laws over others and is prepared to do whatever it takes to uphold and assist its favorites.”
Commentary
While an alternative ruling would have advanced Congressional efforts to dismantle the law, the political backlash could have been significant for Congressional leadership and for the Republican Party facing upcoming elections. Arguably, Congress would have been overtly criticized for removing subsidies from sick and disenfranchised Americans, placing extreme pressure on Republican governors and state legislatures to find a fix to help impacted Americans.
Importantly, the elimination of subsidy eligibility through Healthcare.gov would have resulted in coverage becoming cost-prohibitive for many Americans. While critically important for American families, this consideration is also important in estimating employer costs.
WHY? If coverage became too expensive for many (without subsidies), this leads to “adverse selection” within the coverage pool. Adverse selection occurs when those with serious health conditions disproportionately join the pool. In many states, including Ohio, the resulting impact would have further increased the costs for all health plans within one common rating pool.
Conclusion
Continuous delays, modifications and pending court rulings have created ongoing uncertainty surrounding the implementation of the ACA. Click HERE for an Oswald advisory summarizing implementation of the ACA, highlighting delays, modifications and repealed provisions. Uncertainty has placed undue stress on employers for over 5 years in structuring plan designs, estimating costs and making solid, forward-looking decisions.
Oswald Companies will continue to provide updates and clarifications, in user-friendly formats, and assist with ACA implementation challenges and opportunities. We seek to alleviate administrative burdens facing employers and offer solutions to complex multi-year planning needs within the evolving health insurance marketplace.
Click HERE for an EVENT RECAP from our Health Care Reform Forum that took place June 22.
