Sunday, February 08, 2015

ACA Subsidies Threatened?: Thoughts on King v. Burwell

This March, the Supreme Court will hold a hearing on the King v. Burwell case.  The tone of that hearing and how different justices behave will cause a million words to be written, but we won't know for sure how the Court will rule until later this summer.

Here are a couple thoughts on the case.

Recall that the basic claim of the plaintiffs (King et al.) is that the Affordable Care Act specifies that subsidies for purchase of health insurance are only available for policies bought on exchanges created by a State -- with a State being defined as one of the fifty states plus the District of Columbia.

The respondents -- Sylvia Burwell et al. -- reply that this is much too narrow a reading of the Act and that there can be no doubt that the overall intent of the Act was to give subsidies to anyone who met the income eligibility requirements, no matter whether the policy was bought on an exchange established by a State or on an exchange established by the Federal government, in the cases where States did not establish their own exchanges.

I think there is a good chance that the Supreme Court will side with King, but that is my opinion.  Also let me say that I have always held the concept of subsidies for health insurance for low income persons one of the best parts of the ACA (although the subsidies could be implemented much better!).

For now, let me point out just two arguments that I find interesting.

1.  There is this idea out there that the part of the ACA where it says that subsidies are only for State exchanges is a minor out-of-the-way clause -- in fact, §36B(c)(2)(A)(i), which is defining what a "coverage month" is.  Here is the actual text, courtesy of Cornell's legal site:
(2) Coverage month 
For purposes of this subsection—
(A) In general 
The term “coverage month” means, with respect to an applicable taxpayer, any month if—
(i) as of the first day of such month the taxpayer, the taxpayer’s spouse, or any dependent of the taxpayer is covered by a qualified health plan described in subsection (b)(2)(A) that was enrolled in through an Exchange established by the State under section 1311 of the Patient Protection and Affordable Care Act, and
(ii) the premium for coverage under such plan for such month is paid by the taxpayer (or through advance payment of the credit under subsection (a) under section 1412 of the Patient Protection and Affordable Care Act).
But as the Brief for the plaintiffs argues (see page 29 of plaintiffs' brief), this is also the  place where the Act tells us that  health plans bought through insurers or brokers will NOT be eligible for subsidies (through the language at issue, saying that only plans bought on State exchanges qualify).  Now that is an extremely important part of ACA (one I don't understand though), that plans bought directly from insurers do not qualify for subsidy.  But there it is, buried in an obscure clause of the law.  Welcome to Federal law -- read it carefully, including the footnotes!  We all know the footnotes are the most important parts of any good paper!

2.  There is this claim by the respondents that the text must be read to include Federal exchanges as qualifying for subsidies, because otherwise the whole Act would fall down.  How could they have written a law with such a self-destructing clause inherent?

Well, this is not really accurate either.  The restriction of subsidies to State exchanges does not by itself imply the house of cards must fall down.  It is also necessary that some States -- many States -- do not establish their own exchanges.  The Congress could easily have thought that States would establish exchanges, and therefore this clause would never be important.  It only became important when State failed to act in the way that Congress thought they would.  The clause is not, therefor, directly destructive of the intent of the overall Act.  The intent could well have been achieved with that clause in it, if only States had not been so damn stubborn, or if it had not proved so difficult to create working exchanges (see Vermont).

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