Date: June 19, 2015
To: Chief Financial Officers, Government Relations Staff, and Legal Counsel
From: Zosia Stanley, Policy Director, Access
Claudia Sanders, SVP, Policy Development
Staff Contact: Zosia Stanley, ZosiaS@wsha.org or (206) 216-2511
Subject: Implications of King v. Burwell for Washington State
The purpose of this bulletin is to highlight potential implications for Washington State of the U.S. Supreme Court’s upcoming decision in King v. Burwell. The key question in King v. Burwell is whether subsidies (tax credits and cost-sharing) will continue to be available for people who purchase health insurance through a marketplace created by the federal government. Most news coverage of King v. Burwell focuses on the impact for states with federally-run health exchanges. Washington State operates a state-run exchange, but the case could have consequences nationally which impact our state.
King v. Burwell is a case about six words in the Affordable Care Act (ACA) that could have a significant impact on access to health insurance for lower-income individuals and families. The plaintiffs (King) challenge the Internal Revenue Service (IRS) regulations allowing tax subsidies in the federally-run HealthCare.gov. These were initiated under Secretary Burwell at Health and Human Services. The plaintiffs argue that the ACA specifically directs insurance subsidies to be available only in states that set up and run their own exchanges. The plaintiffs focus on language in the ACA about subsidies being available in “an exchange established by the State.” The federal government argues that the law, read as a whole, makes clear that subsidies are available for those enrolling in any exchange, whether established by the state or federal government.
Through state- and federally-run exchanges, the ACA has extended health insurance to millions of Americans. Subsidies are currently available for those buying insurance through state or federal exchanges and earning between 100% and 400% of the federal poverty level. In states using the federal marketplace, 87 percent of people who have signed up for coverage for 2015 receive subsidies. An estimated 7 to 9 million Americans in 34 states could lose federal assistance in paying for health insurance if the Court rules in favor of the plaintiffs. Loss of subsidies will mean that most of these people will not be able to afford health insurance.
The U.S. Supreme Court’s ruling in this case is expected in late June. Most analysts agree that there are three likely rulings:
- The Supreme Court upholds the IRS regulations and subsidies remain available in all states;
- The Supreme Court reverses the IRS regulations, but the Court, Congress, or President provides short-term relief that keep subsidies flowing for a time period; or
- The Supreme Court reverses the IRS regulations, and the decision takes effect mid-year when consumers will be ineligible for subsidies.
The last two choices will likely result in significant disruption both in Congress and in states using the federal exchange. The ACA continues to be a polarizing issue in Congress, and the availability of subsidies is a key provision. Congress will likely spend substantial time and energy on this issue. Removal of subsidies in federal exchanges will disrupt state health insurance markets and require major, labor-intensive state action to address and correct.
Any decision that eliminates the tax subsidies which currently lower the cost of health insurance for consumers will cause substantial disruption in availability, affordability, and access to health insurance and services. This disruption may cause a ripple effect in the health insurance market nationally, including states with state-run exchanges.
A Court ruling against subsidies in federal exchanges will demand considerable Congressional time and attention. Congress could maintain the stability of the market if it acts, but the politics around this polarizing issue will be challenging and time-consuming. This could mean that Congress is distracted from addressing other pressing matters.
If a timely and permanent Congressional fix to permit subsidies is not put in place, we could see shrinking participation by both consumers and plans on a national basis, resulting in escalating prices that may destabilize access and affordability of health insurance. Several insurance companies that participate or plan to participate in Washington’s state-run exchange, such as Premera and Moda, also participate in states with federally-run exchanges. Disruption in other states could impact the financial stability and affordability of the health insurance market in Washington. It is difficult to forecast the size and scope of this impact.
The Supreme Court is expected to issue a ruling in King v. Burwell toward the end of June. However, the opinion could be issued any day. WSHA recommends close attention to the Court’s ruling.
Background and References
Under the ACA, states were required to have a health benefit exchange in place by January 1, 2014. Exchanges could be developed and implemented by the state or by the federal Department of Health and Human Services. Washington State opted to establish a state-run health benefit exchange via a public-private partnership. Access to insurance via the state’s health exchange, coupled with the state’s decision to expand Medicaid, has led to a nearly 40 percent reduction in the number of uninsured people in the state.