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King v. Burwell and the future of the Federally Run Marketplaces: And the winner is ...?

By Angela Boateng

​Well, we do not know yet, but we are definitely going to find out soon!

As you all know by now (unless you have made a conscious effort to avoid listening), in March 2015, the Supreme Court heard a second round of oral arguments on the Affordable Care Act (ACA). This time for a case challenging the ACA’s health care subsidies and whether state health insurance Exchanges run by the federal government are eligible for these subsidies.

Currently, the subsidies in the law help ACA participants with health insurance payments by lowering their financial contribution to premiums and out-of-pocket expenses. Without these subsidies, some participants may not be willing or able to purchase health insurance through the Exchanges.

Who does the case involve this time?

In one corner, interestingly enough, the individuals who brought the suit (i.e., the plaintiffs) receive subsidies to help pay for their health insurance. But, the plaintiffs argue in this case that they are not eligible because their state, Virginia, did not set up its own exchange.

To support their argument, they point to six words, in one sentence, located in a technical formula directed at the federal Department of Treasury’s calculation of subsidies, within a document that is close to 1,000 pages in length (yes, they actually found the proverbial needle in the haystack!). This sentence essentially says that the subsidies are available to individuals, if they are participating in “an Exchange established by the State.”

While, in the other corner, we have the federal government (i.e., the defendant) which contends that the subsidies are available to state and federally established exchanges alike because the phrase in contention—“an Exchange established by the State”—includes every insurance marketplace set-up by a government, including the federal government’s

So, who will win? No one knows right now. As usual, the only thing  prognosticators have to base their predictions on are comments made by the Justices during oral arguments.

And what did the arguments reveal?

Well, there were a few Justices who seemed to be in support of the government. Of particular note were comments made by a few of the Justices regarding the “death spiral” that may result, if the Court rules in favor of the plaintiff.

In this so-called “death spiral,” insurers would still be required to provide health insurance; however, many healthy individuals would drop their health insurance coverage, leaving a majority of sicker individuals in the health insurance plans. This would result in very high costs for health insurance and, eventually, in more people dropping coverage.

There were also comments by a few other Justices who seemed to be in favor of the Plaintiffs; these Justices argued essentially that the law means exactly what is written.

Justice Alito, for example, specifically stated that “if Congress did not want the phrase ’established by the State‘ to mean what that would normally be taken to mean, why did they use that language? … Why didn’t they include a provision saying that an Exchange established by HHS is a State Exchange when they have a provision in there that does exactly that for the District of Columbia and the territories?”

Currently, Pennsylvania is one of 34 states that has a federally run health insurance marketplace. On Tuesday, June 2, however, Gov. Wolf announced that the Commonwealth had submitted an application to the federal Department of Health and Human Services to convert the current federally-run exchange to state-based exchange.

Is this Pennsylvania’s move to avoid the death spiral if the ruling favors disallowing subsidies for the federal Exchanges? Perhaps. Or, is this just the next step in the Wolf administration’s plan to dismantle Healthy PA? Maybe.

As stated by Gov. Wolf, this move is being made to “[protect] hardworking Pennsylvanians from losing the assistance they rely on to purchase health care coverage … [t]hese actions do not mean that Pennsylvania must set up a state-based marketplace. However, the responsible thing to do is set up a plan to protect hundreds of thousands of people….”

So again, we will see what happens. The Court is expected to issue its ruling by the end of June. In the meantime, Pennsylvania has taken the first step in an attempt to shelter itself from any potential fallout from the Court’s decision.

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