In King v. Burwell, the Stakes are High

The following is an excerpt from Navigant Healthcare’s Pulse Weekly. Click here for a complete copy of this week’s article.

Sometime between now and the end of June, the Supreme Court will release its decision in the case of King v. Burwell. Its focus is on Section 1321 of the Affordable Care Act whereby eligible individuals earning between 100-400% of the federal poverty level who enrolled for insurance coverage might NOT be eligible for tax credits (subsidies) to help pay their premiums because they enrolled thru Healthcare.gov rather than an exchange “established by the state.”¹

No doubt, legal experts will be circumspect in divining the court’s options while political leaders at the federal and state levels are busy developing alternatives (see Exhibit A for recap of Republican options being proposed). But here’s my somewhat pedestrian view of the practical implication of the Court’s decision:

If the court sides with the plaintiffs….

  • The numbers of uninsured will increase: Those lacking insurance coverage of any kind in the U.S. use a patchwork of public programs and hospital emergency services to access care. It’s rarely coordinated and almost always expensive. If the 7.4 million affected lose their tax credit, not doubt most will re-join the ranks of the uninsured unless their state ramps up an exchange or provides emergency funding to replace their lost subsidies.¹
  • Confusion will impact doctors, hospitals and other providers. These newly insured have booked appointments and procedures: some will show up for an appointment knowing they’re unable to pay. And continuity of care for some who have already seen clinicians under a course of treatment will lapse as their relationships with providers is interrupted.
  • Insurers will re-assess the viability of their individual market strategy. Face it. Insurers offer individual plans as part of their business model, but it’s the most costly and risky in their portfolio. Having a government guarantee for 75% of these premiums made it less risky. All bets are off if the court rules with the plaintiffs: insurers will make the case to their investors it’s necessary to raise individual premiums dramatically or exit the line of business altogether.
  • And many employers will reevaluate their workforce plans in light of the employer mandate’s dissolution. No longer feeling the pressure to provide affordable coverage to employees working 40 hours or more each week, employers are free to decide what, if any coverage, to offer. Employees could see increased shared financial responsibility, new benefit designs, unrestricted work hours per week, and potentially loss of employer sponsored health benefits.³

If the court sides with HHS (Burwell)…

The viability of health exchanges (marketplaces) will become an even more pressing national issue: in many of the 13 states that operate their exchanges, operational and funding issues are prevalent. Healthcare.gov is improved from its problematic launch in 2013 but not without flaws.4 And after 2016, when state run exchanges are allowed to expand to cover larger numbers of individuals and companies, will they become the primary channel through which private insurance is obtained in our system of care.5

No one outside its 9 jurists and their clerks know how the Supreme Court will rule on this tricky issue. In its 226 year history, at no period has the structure and function of the judicial branch played such a central role in defining the healthcare system.6 And not since June 28, 2012, when SCOTUS affirmed that the Affordable Care Act is Constitutional has the spotlight shined as brightly on its deliberation.

Paul

1111th Congress Public Law 148, “The Patient Protection and Affordable Care Act,” U.S. Government Printing Office, March 23, 2010, [H.R. 3590].
2Matthew Buettgens, John Holahan, Linda J. Blumberg, and Hannah Recht, “Health Care Spending by Those Becoming Uninsured if the Supreme Court Finds for the Plaintiff in King v. Burwell Would Fall by at Least 35 Percent,” Robert Wood Johnson Foundation, February 2015.
3Andrew Kloster and Alden Abbott “King v. Burwell and the Mandates: What Happens If the Supreme Court Rules Against the Administration?” The Heritage Foundation, March 13, 2015.
4“State Health Insurance Marketplace Types, 2015,” Kaiser Family Foundation, April 2015.
5Mary Agnes Carey, “Consumer Guide On Health Law Enrollment: Is The Second Time The Charm?” Kaiser Health News, November 11, 2014.
6Lyle Denniston, “After 226 years, a constitutional answer to a controversial question,” Constitution Daily, July 25, 2013.

The opinions expressed in this article are those of the author and do not necessarily represent the views of Navigant Consulting, Inc. The information contained in this article is a summary and reflects current impressions based on industry data and news available at the time of publication. Any predictions and expectations noted herein are inherently uncertain and actual results may differ materially from those contained in this article. Navigant undertakes no obligation to update any of the information contained in the article.

©2015 Navigant Consulting, Inc.