By now, every reader of THCB must be aware the Supreme Court is hearing arguments this week in a case that could undermine much of Obamacare. Simplifying somewhat, the plaintiffs in King versus Burwell argue that the phrase “exchange established by the state” in the Affordable Care Act’s section 1311 dealing with tax subsidies precludes making such subsidies available to those who enroll through the federal exchange(s). The government argues (a) that other sections of the law make it apparent that all exchange enrollees are potentially eligible for subsidies, and (b) that language in section 1321 providing that HHS shall “establish and operate such exchange within the state,” where a state is unable or unwilling to create their own exchange, essentially establishes a state exchange.
As many media articles have commented, the implications of a SCOTUS ruling for the plaintiffs are huge. Some five to eight million enrollees in the 34 federal exchange states would lose their subsidies, making insurance unaffordable for many of them, and premiums in these states would skyrocket—all while leaving the existing tax fines for being uninsured in place.
“Then you should say what you mean,” the March Hare went on.
“I do,” Alice hastily replied; “at least–at least I mean what I say–that’s the same thing, you know.”
“Not the same thing a bit!” said the Hatter. “You might just as well say that “I see what I eat” is the same thing as “I eat what I see”!”
Alice in Wonderland. A Mad Tea Party. Lewis Carroll.
The brilliant Carroll had a field day with logical fallacies in the fictional mad world of hyper rationalism. Alice in Wonderland still passes for children’s fiction. The verdict in Halbig versus Burwell is a Tea Party no less. Alice from Dickensian London, if magically teleported to present day might have believed she had fallen in to a rabbit hole.
The DC Court of Appeals ruled in a narrow 2-1 decision that citizens who bought insurance in the individual marketplace in states where the Federal government runs the exchange do not qualify for subsidies. But in states with state-run exchanges they do qualify for subsidies. The IRS’s subsidies are unlawful in the former but perfectly lawful in the latter.
The statutory language in the Affordable Care Act (ACA) states that subsidies are available to those “enrolled in an exchange established by the state…”
Personally, I can’t see the issue. What’s the difference, in principle, between subsidizing citizens in exchanges established BY the states and citizens in exchanges established FOR the states by the Federal government?
Is this the first war between prepositions in human history?
The argument is that we must follow the rule of the law as it is written. Section 1401 (rules on who can get subsidy) applies to Section 1311 (the one about how exchanges are set up) not Section 1321 (the one about Federal government running the state exchanges when states don’t).
Today’s 2-1 decision by the DC Court of Appeals striking down federal premium subsidies, in at least the 27 states that opted for the feds to run their Obamacare insurance exchanges, has the potential to strike a devastating blow to the new health law.The law says that individuals can get subsidies to buy health insurance in the states that set up insurance exchanges. That appears to exclude the states that do not set up exchanges––at least the 27 states that completely opted out of Obamacare. Another nine states set up partnership exchanges with the feds and the impact on those states is not clear.The response by supporters of the law, and the IRS regulation that has enabled subsidies to be paid in the states not setting up exchanges, hinges on the argument that the language is at worst ambiguous and the Congress never intended to withhold the subsidies in the federal exchange states.
But in the DC Court ruling one of the majority judges said, “The fact is that the legislative record provides little indication one way or the other of the Congressional intent, but the statutory text does. Section 36B plainly makes subsidies only available only on Exchanges established by states.”
My own observation, having closely watched the original Obamacare Congressional debate, is that this issue never came up because about everybody believed about all of the states would establish their own exchange. I think it is fair to say about everyone also believed a few states would not establish their own exchanges. Smaller states, for example, might opt out because they just didn’t have the scale needed to make the program work. I don’t recall a single member of Congress, Republican or Democrat, who believed that if this happened those states would lose their subsidies.
With the ACA exchange enrollment deadline almost behind us, this is a good time to take a look at the big picture.
Three years after the first baby steps of implementation, what has the ACA accomplished?
When we consider the ACA, we can think of two broad goals. The “easy” goal was expanding coverage to the uninsured. We say “easy” because regulators should be able to succeed by simply throwing money at the problem, and that is a task our elected officials seem particularly adept at accomplishing.
The “hard” goal was bringing down the rate of growth in health care spending.
This has proven to be a difficult task for policy makers, who have been trying (and failing) for decades and have often done more harm than good.
We first consider the goal of expanding coverage to the uninsured. From its onset, the ACA chalked up a small victory by requiring plans to continue coverage for dependents under age 26.
This provided coverage to as many as three million uninsured, albeit the healthiest members of the population. The lion’s share of the reduction in the numbers of uninsured was supposed to come from Medicaid expansions and private exchanges.
And here is where the problems emerge.
Medicaid ranks have swelled in the 27 states (including DC) that have chosen to expand the program. Republican leadership in other states continue to assert they will not expand Medicaid, but given the exceptionally generous federal funding for this expansion, we find it hard to believe that most of these states won’t soon join the expansion.
A 26-year-old man who makes $36,000 a year in Philadelphia finds out that he is not eligible for a health insurance subsidy, and must pay his $205 monthly premium without any help.
This, despite the ACA’s subsidies for people earning up to 400% of poverty (about $46,000).
Has he fallen into the subsidy gap?
The latest talk about a subsidy gap into which some millennials are falling is mystifying to me. It seems to be a product of a misunderstanding about how the subsidies are calculated.
Let’s remember that the goal of the subsidies is to ensure that people earning between 100% and 400% of the federal poverty level (FPL) pay no more than a certain percentage of income on health insurance premiums.
This cap is set on a sliding scale, so that people on the higher end of the FPL scale are expected to pay a higher percentage.
The caps range from 2% for someone at poverty level up to 9.5% for someone earning between 300-400% of poverty level. That’s how the Affordable Care Act defines “affordable.”
The amount of subsidy is based on the difference between that cap and the premiums for the second-cheapest silver plan on the market. The subsidies are not an entitlement for all people earning 100%-400% of FPL, nor should they be.
They kick in only when the premium for that silver plan exceeds the stated percentage of income.
Below that cap, the premiums are considered affordable and people are not eligible for subsidies. That’s not a gap; that’s the way the law is designed.
So many old rules in health care and insurance no longer seem to apply.
I keep stumbling upon situations, where, what used to be up is now down and what used to be down is now up.
No one seems to know for sure how things will settle out under the new reality created by Obamacare and the even more unpredictable reactions to the law by health care companies, employers and, most especially, you and me.
I’ve started using the term “weightlessness” to describe this state we’re in. Picture the astronauts on the international space station, floating through a room, flipping at will, as likely to settle on a wall or on the ceiling as on the floor.
That’s what life is like under Obamacare now—for physicians, hospital administrators, insurance executives, benefits brokers and employers.
Here are a few examples:
1. I wrote last week about how a chunk of workers, even at large employers with generous benefits, would actually get a better deal on health insurance from the Obamacare exchanges than from their employers. So their employers are starting to consider whether they should deliberately make health benefits unaffordable for those low-wage workers, so they can qualify for Obamacare’s tax-subsidized insurance.
That could be good for both employers and employees. The effect on taxpayers, which would switch from granting a tax credit to employers to instead granting it to the employees, is unclear.
2. Even though insurers were certain that price would be king on the Obamacare exchanges, that hasn’t led most customers to buy the plans with the cheapest premiums. As I wrote Friday, 76 percent of those shopping on the exchanges in my home state of Indiana have picked the higher-premium silver and gold plans, with only 24 percent picking bronze plans.
“There are a few geographies where we believe we are gaining share despite lower price competition which points to the value of our local market depth, knowledge, brand, reputation and networks,” WellPoint Inc. CEO Joe Swedish said during an January conference call with investors.
It’s possible that’s a result of older and sicker patients being the earliest buyers on the exchange, and that as healthier people buy coverage, they’ll gravitate to the low-cost bronze plans. But that hasn’t happened—which, as I wrote on Friday, has proved wrong hospitals’ concerns about the super-high deductible bronze plans.
Shifting Millennial Attitudes on Obamacare December 2013.
Harvard Institute of Politics. Dec 4th, 2013. Poll
A few observations after 10 weeks of Obamacare implementation.
The Obama administration released the first two months enrollment figures this week. With HealthCare.gov still struggling in November, the enrollment of 137,000 people in the 36 states was expected. The main event for the federal exchanges will play out in December now that most people can navigate it
What I found notable in the report was the lack of robust enrollment in the states. In states where the exchange has been running at least adequately for many weeks now, the enrollment numbers are far from what I would have expected.
California enrolled 107,000 people in private plans in the first two months. But California has cancelled 800,000 current individual health plans effective January 1––all of whom have to buy a new plan by January 1 or become uninsured. The only place those who are subsidy eligible can get a subsidized plan is in the California exchange.
Many people who remain basically positive about the Affordable Care Act are viewing the enrollment statistics like the football fan whose team is 2-6 and who point out that the team could win 7 out of its 8 remaining games and still probably make the playoffs.
Yes, getting off to a really bad start doesn’t preclude a happy ending. Success may still be mathematically possible. But unless there’s good reason to think that the fundamental factors such as poor coaching, poor game plans or unexpected injuries that have led to the bad start no longer apply, the more reasonable prediction is that things will continue more or less as they have.
It’s time to start thinking realistically about what happens if a core component of the Affordable Care Act, subsidized, non-underwritten health insurance available from private insurers, essentially fails to provide many with better access to medical care. This might not happen in every state — there might be a few whose Exchanges can be deemed “successful” — but it is looking more and more to me as if we are heading for enrollments in many states well, well short of that on which the arguments for the ACA were significantly premised.
For purposes of this blog entry, I’m going to assume that enrollment in the Exchanges ends up being about 2 million for 2014 instead of the projected 7 million. I can’t rigorously justify that number — but, of course, neither could the pundit who is now saying 4 million. And, if I had time and space I’d prefer to do this analysis under a variety of scenarios, but, for now, the 2 million figure feels about right. And if I were betting on which side of the 2 million we will fall, it would be the lower side. What are the consequences? I can’t address all of them in a single blog entry — and trying to predict matters past 2014 gets very treacherous — but here are some.
And, for those of you who don’t want to read further, here’s the headline:
Insurance sold through Exchanges without medical underwriting — a central promise of the Affordable Care Act — is likely to implode in a significant number of states by 2015 while limping along in several others but providing little net desired decrease in the number of people without quality health insurance. The silver lining in this failure will be that the program will likely cost less than projected due to fewer number of people receiving subsidies, although this reduction will be partly offset by higher-than-projected subsidies to the insurance industry. Expect significant pressure to grow among supporters of the Affordable Care Act to use these net savings to increase the subsidies available to people buying coverage through the Exchanges and to lure insurers in the problem states back into the Exchanges.
The only place a Californian can buy a policy with a subsidy is on the Covered California state exchange.
So, it would certainly seem that the only way those 510,000 people can continue their coverage and get a subsidy is to sign-up on the California health insurance exchange––80% of them by December 23.
So, if only the canceled policyholders who are subsidy eligible replace their canceled policies Covered California will make the lower end of its entire 2014 enrollment goal. Doesn’t sound like much of a stretch goal for them.
Besides the 1.1 million who have lost their policies because of cancellation, Covered California has estimated that 5.3 million Californians are uninsured and eligible to purchase coverage on the state exchange––about half with subsidies.
Beginning in 2014, millions of Americans will discover that they qualify for subsidies designed to help them purchase their own health insurance. The aid will come in the form of tax credits, and many will be surprised by how generous they are.
Not only low-income, but moderate-income families earning up to 400 percent of the federal poverty level (FPL) – currently $44,680 for a single person and $92,200 for a family of four – will make the cut. Within that group, households bringing in less than 250 percent of the FPL ($27,925 for a single person, $57,625 for a family of four) also will be eligible for help with out-of-pocket costs.
If your boss offers benefits, you won’t qualify, unless …
If your employer offers health insurance you won’t be eligible for a tax credit – though there are two exceptions to this rule:
If your share of the premium for your employer’s coverage would exceed 9.5 percent of your income, or
If your boss offers a skimpy policy that pays for less than 60 percent of an average worker’s covered benefits, you will qualify for help.
If I qualify, how much will I receive?
The size of the tax credit depends on your income, your age, how many people are in your family, and where you live.