Insurance Execs Show Subsidy Worries
King v. Burwell is on the brains of health insurance executives.
That case, argued in front of the U.S. Supreme Court earlier this month, is expected to be decided by June. It will determine whether the tax subsidies provided to millions of Americans who purchase health coverage through the healthcare.gov insurance exchange would be abolished and only subsidies provided through a state-operate exchange would be considered valid.
The case was an ongoing topic of conversation at Wednesday's annual Keenan Summit in Los Angeles, which is sponsored by Keenan, Torrance-based large group insurance broker. The two-day conference is held in both Oakland and L.A. on consecutive days.
Among the health insurance executives who were quizzed about the case during a panel, no real consensus emerged, other than a close decision. “It will be a 5-4 decision no matter what,” said Larry Tallman, president of Managed Health Network, the behavioral health services subsidiary of Woodland Hills-based Health Net. Tallman however believes the subsidies would be upheld, although he also thinks the Obama Administration has a contingency plan in place if they are struck down.
Eric Dahms, a managing director with Anthem Blue Cross of California, also believed the high court would keep the subsidies in place. But Tom Finn, a regional vice president with Aetna, thought they would be struck down.
“Unfortunately, the court is more politicized than it should be,” said Henry Loubet, Keenan's chief strategy officer and a member of the Payers & Providers editorial board. Loubet also believes the high court will rule against keeping subsidies in place, noting that Justice Anthony Kennedy's recent remarks during a budget hearing in front of the House Appropriations Commitee could be telling.
“We routinely decide cases involving federal statutes and we say, ‘Well, if this is wrong, the Congress will fix it,’” Kennedy remarked during the hearing. “But then we hear that Congress can’t pass a bill one way or the other. That there is gridlock. Some people say that should affect the way we interpret the statutes. That seems to me a wrong proposition.”
Although an adverse ruling by the high court could be quickly repaired by Congress, it is not expected to occur. The body been at odds with President Obama since the 2010 mid-term elections brought a Republican majority into the House of Representatives. Republicans also took control of the Senate during last year's mid-terms. The GOP has been overtly hostile to the ACA since it was signed into law five years ago, and the House has voted dozens of times to repeal the law.
Loubet noted that Chief Justice John Roberts, whose crucial 2012 vote in favor of the constitutionality of the Affordable Care Act preserved the law, may also be under more pressure to issue a vote against the premium subsidies.
The Covered California exchange is operated by the state, so the subsidies it offers individual enrollees would not be impacted. Nevertheless, Loubet said an adverse ruling would have a “cataclysmic impact” on those millions of Americans who receive subsidies. In Mississippi for example, nearly 90% of the state's 150,000-plus exchange enrollees depend on the subsidies to make their coverage affordable.
According to a recent study by the Santa Monica-based think tank the Rand Corp., an adverse ruling by the high court could lead to as many as 13.5 million Americans dropping coverage due to the loss of their subsidies, an overall drop of 68%. Premiums for silver plan coverage would also rise an average of 43%.
Tallman believes if the subsidies are eliminated, the U.S. Department of Health and Human Services would declare that the 38 states that use the healthcare.gov are leasing the exchanges and operating them on their own, a term of art that would satisfy the language in the ACA that they must be operated “by the State.” He expected that would be reinforced by an executive order issued by President Obama. “We've been seeing some communication along those lines,” Tallman said, although he did not provide specifics.
Some executives on Wednesday also suggested that the Obama Administration would fast-track a plan that would allow states to operate the healthcare.gov exchange on a partnership basis.
Despite the seeming contingencies that might be quickly put into place, all agreed that a ruling against the subsidies would likely cause a backlash against the Republican party, since many Americans are satisfied with the coverage they have been able to purchase because of the ACA.
“A ruling against the subsidies would create chaos,” Tallman said.
