ACA subsidy rulings could encourage more state exchanges or be just a blip on the radar

Conventional wisdom is that the federal subsidies that help people buy insurance through state and federal exchanges will survive the current court ruling against them. However, the review by the full judicial panel of the DC circuit court will not happen until this fall. That gives people plenty of time to think about losing health […]

Conventional wisdom is that the federal subsidies that help people buy insurance through state and federal exchanges will survive the current court ruling against them.

However, the review by the full judicial panel of the DC circuit court will not happen until this fall. That gives people plenty of time to think about losing health insurance and for politicians to consider the implications of that. I initially thought that nothing would encourage Republican governors to launch their own state exchanges, but I may have been wrong. Here are three predictions about what could happen as a result of yesterday’s rulings.

More states exchanges

National Center for Policy Analysis senior fellow Devon Herrick said that the potential of thousands of voters losing health insurance might motivate governors and legislators to reconsider a state-based insurance exchange.

“Can you imagine a governor facing reelection, and thinking, ‘Did I prevent some of my constituents from getting a subsidy worth thousands of dollars?'” he said. “I
wouldn’t want to run under those conditions.”

Ed Leeds of Ballard Spahr agreed that the potential loss of subsidies throws the burden to the states to solve the problem.

“No one expects Congress to step in to solve the problem,” he said.

Herrick’s solution for the paltry number of state exchanges is to make it easier to launch the marketplaces.

“The rules are onerous, and the types of plans you can sell are highly regulated,” he said. “The regulations were what made a lot of politicians uneasy.”

Herrick suggests that lawmakers make these changes:

  • Create a uniform tax credit for all enrollees, regardless of whether they buy in a state or federal exchange
  • Streamline the rules and allow flexibility for states that want to operate an exchange
  • Increase consumer choice by offering a wider range of health plans, rather than limiting the options to the pre-approved plans offered by the Obama administration

Herrick said limited coverage plans should be more widely available on the exchanges, provided that there is no tricky fine print on further limits. He used tri-share insurance plans as an example of limited coverage policies that are affordable but also provide enough access to care. When Tennessee scaled back their Medicaid expansion, people who were going to lose access to coverage were given a new plan. With tri-share plans, the premium is split three ways between the person, the state, and the employer.

“Those plans did max out at $25,000, but for about 99% of the people in those plans, they would not exceed their annual benefit,” he said. “These individuals are not as concerned about high deductibles, they want a plan that covers the care they need – the occasional doctor visit, the occasional prescription.”

Herrick said he did not think the end of the subsidies would mean more people would be fined for not having health insurance.

“If affordable coverage is not available, the odds of the person being penalized are slim,” he said.

A death blow to the employer mandate

The level of ACA uncertainty is not as high as it was in 2012 but this ruling has come down uncomfortably close to the start of the 2015 open enrollment. Also, the potential loss of subsidies could put the employer mandate into question as well. It is supposed to go into effect in 5 months. However, that mandate was based on several other elements of the ACA working. If access to affordable coverage goes away, the employer mandate might disappear as well.

The whole concept of reform was that certain things were predicated on other things, Leeds said, namely that there would be affordable, universal coverage.

“If you lose the subsidies, you may lose a lot of people out of the individual mandate,” he said.

The employer mandate http://www.cbpp.org/cms/?fa=view&id=3163 was based on two assumptions as well, and both depend on at least one employee obtaining subsidized coverage. The employer penalty kicks in when a company does not provide any coverage or does not provide coverage that is affordable to all employees. The penalty kicks in when employees use federal subsidies to buy coverage.

“If there is nobody who could get subsidized coverage, then you don’t get the penalty,” he said. “Employer mandate will lose its teeth.”

Leeds said that he does not see any evidence of employers dropping health insurance due to the ACA. He said that employers want to see how well the public exchanges work before shifting employees to that system.

“You may see a lot of restructuring in the future that results from private health insurance exchanges, but it’s too early to tell to know where things will settle,” he said.

A blip on the screen

Judy Waxman, vice president of Health and Reproductive Rights at the National Women’s Law Center, said that the ACA is here to stay.

“There will still be fights around the edges of the law, but now that we have so many millions of people signed up, I don’t see Congress taking it away,” she said.

Waxman isn’t worried about another Supreme Court ruling either.

“The Supreme Court already took the heat for upholding the law, so I don’t see them overturning it now,” she said.