Last Friday, the Supreme Court announced that they would hear King v. Burwell. That case is essentially the same as Halbig v. Burwell, and the two cases have been wending their way through the court system for quite a while. The crux of their argument is that the ACA only authorizes the government to give out subsidies in states that are running their own exchanges.
What’s the story with this lawsuit?
The wording of the law is that subsidies are available “through an Exchange established by the State under 1311” Section 1311 explains the requirements and expectations for states establishing their own exchanges. At the time, Congress did not anticipate that so many states would default to the federally-facilitated marketplace (FFM) at HealthCare.gov [quick sidenote… just because a state is using HealthCare.gov for enrollment does not necessarily mean it doesn’t have a state-based exchange. Nevada and Oregon are both using HealthCare.gov for the upcoming open enrollment, but they are still state-based exchanges – technically “supported state based marketplaces” or SSBMs].
Anyway, back in 2009/10, Congress assumed – obviously incorrectly – that states would want to have control over their own exchanges. Ultimately, we have 16 states plus DC that are running their own exchanges. The rest of the country defaulted to HealthCare.gov. Initially that was not considered a big deal (and from a financial, economies of scale perspective, it makes sense to use one federally-run marketplace). But now that the King and Halbig cases have gained more traction (they were initially dismissed by many legal scholars), it’s becoming obvious that Colorado made the right choice in opting to set up a state-run exchange.
The Supreme Court is expected to hear the case in March, and a ruling will likely be handed down by June. Opponents of the ACA are excited about the possibility of this lawsuit sinking the healthcare reform law. At least four Justices have to agree that a case has merit in order for the Supreme Court to hear the case, and they only take about one in every hundred cases presented to them. But while there is certainly cause for concern over the future of the ACA, a post on SCOTUSblog this morning is titled “It’s way too soon for ACA opponents to celebrate” and to be sure, there’s still a long way to go with this one.
Colorado isn’t impacted by King v. Burwell
What does all of this mean for Colorado? Not much. The King and Halbig lawsuits are addressing the legality of subsidies in the federally-facilitated marketplace. Nobody is disputing the legality of subsidies in state-run marketplaces like we have here in Colorado. Connect for Health Colorado was established under state law, and is a fully state-run marketplace. Subsidies here are safe, regardless of the outcome of the King case.
Don’t get me wrong – a ruling in favor of the plaintiffs in this case would be a devastating blow to the ACA. Particularly so for the millions of people who can finally afford health insurance because of the subsidies, but happen to live in states that defaulted to HealthCare.gov instead of establishing their own exchanges. If the High Court rules in favor of the plaintiffs, the long-term outcome is hard to predict. There are potential work-arounds that states could use, but those would likely be rejected by states where leadership is opposed to the ACA. And Congress could just fix the wording of the ACA, but that’s clearly unlikely to happen in the next two years. Under the current guaranteed-issue model in the individual health insurance market, a strong individual mandate is essential. Removing subsidies from millions of people in the FFM states would significantly undermine the individual mandate (it would still be there, but most of those people would qualify for exemptions, since they would no longer be able to afford their coverage). If the guaranteed issue portion of the law were to remain in place, the individual insurance markets in those states would destabilize and possibly collapse. Many of the carriers that operate in those states are nationwide carriers, and it’s unclear what that would mean for their overall business model. A lot is riding on this court case, especially in the long-run.
Go ahead and enroll – your subsidies are safe here
But as far as the immediate outcome of the King case, it won’t impact Colorado one way or the other. You can enroll in a new plan or switch to a different plan starting on November 15. If you want your coverage to be effective January 1, make sure you finish your enrollment by December 15 (we recommend not waiting that long, but technically that’s the deadline). And you can enroll anytime until February 15, when open enrollment for 2015 will end. Rest assured that any subsidy you get during open enrollment in Colorado will not be affected when the Court rules on King next June.