VCU news

By Anne Dreyfuss
C. Kenneth and Dianne Wright Center for Clinical and Translational Research

A Supreme Court ruling that is expected by the end of the month will determine if people in Virginia and 33 other states that rely on the federal health insurance marketplace will lose the subsidies that help them pay for coverage. The case, called King v. Burwell, is about whether middle-income Americans in states where the federal government runs the health insurance marketplaces are eligible for subsidies that help them afford insurance.

In a dispute that comes down to one four-word phrase in the Affordable Care Act legislation, the plaintiffs says subsidies are only available to those buying insurance on exchanges “established by the state.” The exchanges being mandated by the federal government do not count as “established by the state” under the law, the plaintiffs argue. In response, the Obama administration asserts that Congress intended the law to include both state and federally run marketplaces.

For more information on the debate and its potential outcomes, we spoke with Peter Cunningham, Ph.D., professor in the Department of Healthcare Policy and Research at the Virginia Commonwealth University School of Medicine.

What is the debate about?

One of the key provisions in the Affordable Care Act that expands insurance coverage is setting up health insurance marketplaces, or exchanges, in each state. People who are not eligible for Medicaid and who don’t have insurance coverage through their employer can shop on the exchanges to get private health insurance coverage. The marketplaces are regulated in a number of ways that makes insurance more accessible. For example, there are no exclusions based on pre-existing conditions. Even more important for the case before the Supreme Court is that those with incomes between 100 and 400 percent of the federal policy level are eligible to receive subsidies to purchase insurance on the exchanges, which most people would not have otherwise been able to afford. Literally the only options for health insurance coverage for these people are to either buy it through the marketplaces or through some other individual policy.

The dispute boils down to a technical issue where the plaintiffs are contending that there is language in the bill that says the subsidies are intended only for people who live in states that set up their own state-based exchange. The reality is that most states did not set up an exchange; rather, they are going through an exchange that was set up by the federal government. That includes Virginia. Because there was some vague language in one section of the bill, the plaintiffs are contending that people in the states that are using the federal exchange are not eligible to receive the federal subsidies and they should have to pay the entire price for health insurance coverage on their own.

If the court rules in the plaintiff’s favor, who in Virginia would lose their insurance?

The Urban Institute estimated that more than 8 million people nationwide, and about 280,000 Virginians, would lose their health insurance. Most of them are going to be employed or dependents of employed people. They’re going to be either people who are self-employed or people working for an employer that doesn’t offer health insurance. By definition, they’re going to have incomes from 100 to 400 percent of the federal poverty level. We’re not talking about the poorest.

The reason this is going to undermine the whole law if the courts rule in the plaintiff’s favor is because it will basically create a death spiral in the insurance markets. The first people to drop coverage are more likely to be younger and healthier. The only people who will stick with their policies are going to be older and sicker people. That’s going to cause the premiums to go up dramatically, which means even more people will drop coverage and basically the whole thing just collapses. You need a good mix of healthy and unhealthy people in an insurance pool in order for the premiums to be reasonably priced.

Eight million people losing health insurance coverage is a bad enough outcome for this, but what it’s basically going to do is effectively destroy the health insurance marketplaces in Virginia as well as the other 33 states where people need to use the federal exchange.

What do you expect to be the outcome?

For those of us who have been following this, it’s obvious what the intent of the law was — that whether you’re getting your coverage through a state-based exchange or federal exchange, you’re going to be able to receive subsidies. It’s ridiculous to think that the people who wrote the bill literally thought that “No, you’re not going to be eligible if you purchase coverage through the federal exchanges,” because that defeats the whole purpose of what they were trying to do. It has huge implications.

My expectation is that the court will rule against the plaintiffs. That’s just my opinion as somebody who has been following this law since the outset and knows with 100 percent certainty what the intent was. The only way the plaintiffs can win is if the majority of the court takes that one passage out of this 2,500 page bill and says: “Based on this vaguely worded passage, we think that the plaintiffs are correct.”

 

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