3 Policy Challenges Health Insurance Exchanges Face

January 06, 2016 - Health insurance exchanges have faced a number of legal challenges in recent months, as some key provisions of the Patient Protection and Affordable Care Act have found opposition. Last June, the Supreme Court ruled on the King v. Burwell court case, which debated whether federal tax subsidies offered through the health insurance exchanges to help people unable to afford health coverage are viable.

King v. Burwell

Had the court case passed in favor of cutting off these federal subsidies, consumers in about three dozen states would be affected, according to National Public Radio. Essentially, King v. Burwell challenged the right of the federal government to provide these subsidies to those who purchase coverage on the federal health insurance exchange.

The main issue at hand was a stipulation ensuring subsidies to individuals who sign up for coverage through a state-based exchange. However, there are a large number of states who decided to forego setting up their own health insurance exchanges and instead rely on the federal marketplace.

The Internal Revenue Service set up regulations in 2012 that ensured subsidies would be offered through both federal and state health insurance exchanges. However, the debate in King v. Burwell revolves around whether “Congress intended to limit the subsidies to state exchanges.”

On June 25, the Supreme Court ruled 6 to 3 in favor of upholding the federal subsidies offered through the health insurance marketplaces. This was the second major Supreme Court ruling on the merits of the Affordable Care Act and secures coverage assistance for approximately 6.4 million Americans, according to the US News & World Report.

The counter argument of the Affordable Care Act’s creators is that the subsidies were meant to be distributed through both state and federal exchanges. The Supreme Court’s ruling shows agreement with this resolution.

“The combination of no tax credits and an ineffective coverage requirement could well push a State’s individual insurance market into a death spiral,” Chief Justice John Roberts wrote.

“It is implausible that Congress meant the Act to operate in this manner. Congress made the guaranteed issue and community rating requirements applicable in every State in the Nation. But those requirements only work when combined with the coverage requirement and the tax credits. So it stands to reason that Congress meant for those provisions to apply in every State as well.”

Budget Reconciliation Bill

In early December, the US Senate voted 52 to 47 in favor of the Budget Reconciliation Bill, which would remove key aspects of the Affordable Care Act and the federal health insurance exchange.

While the Senate did vote in favor of the bill, the House of Representatives must next pass the bill before it has a chance of landing on President Obama’s desk. It is expected that the President will veto the bill and preserve vital parts of the landmark Affordable Care Act.

This measure looks to eliminate the federal government’s right to operate the health insurance exchange as well as block the subsidies given through the HealthCare.gov marketplace to families and individuals unable to afford medical coverage.

Additionally, the bill seeks to eliminate Medicaid expansion under the Affordable Care Act, which has already taken place across 30 states. The ‘Cadillac Tax’ on high-cost coverage plans would also be repealed if the Budget Reconciliation Bill ever became law.

“Passage of the reconciliation bill last night was a shameful display of contempt for women’s health on the part of the United States Senate,” Debra L. Ness, President of the National Partnership for Women & Families, said in a public statement.

“If it were to become law, this bill would reverse the significant gains the Affordable Care Act (ACA) has brought and decimate women’s access to comprehensive reproductive health care. It is another callous attempt by anti-choice, anti-women senators to score political points at the expense of women’s health, well-being and economic security.”

Hotze v.  Burwell 

Another legal challenge that stands in the way of the Affordable Care Act’s provisions including mandates necessary for the existence of the health insurance exchanges is the court case Stephen F. Hotze, M.D., and Braidwood Management v. Sylvia Mathews Burwell and Jacob J. Lew.

In Hotze v. Burwell, a physician from Texas filed a lawsuit on behalf of his company arguing that the individual mandate as well as the employer mandate in the Affordable Care Act are unconstitutional.

The individual mandate requires all non-exempt American citizens to purchase health insurance or risk a tax penalty. The employer mandate imposes a tax on employers with 50 or more employees who do not provide affordable healthcare coverage when at least one full-time employee qualifies for subsidies and signs up for coverage through the exchanges.

On December 14, the Association of American Physicians and Surgeons (AAPS) urged the Supreme Court to offer a writ of certiorari in the court case challenging the employer mandate. The case further argues that the employer mandate goes against the Origination Clause of the Constitution, which stipulates that revenue-raising bills are to be first passed in the House of Representatives.

“Our stance is that we are opposed to the federal government making insurance mandates on anybody,” AAPS Executive Director Jane Orient, M.D., told HealthPayerIntelligence.com. “What it does is it forces people to buy policies that they otherwise wouldn’t buy.”

“In case of the plaintiffs in this case, they were forced to drop the insurance that they had and liked – which violated Obama’s promise that if you like your insurance, you can keep your insurance – and they had a very limited choice of other plans that were much higher in premium cost and did not have the benefits that they wanted but had benefits that they didn’t want.”

“It was a choice between either buying this insurance that you didn’t want – in many cases, it does not include the hospitals or physicians that you liked – or pay $100 per day per employee to the federal government and get nothing in return for it.”