July 22, 2014 Leave a comment
Three judges from the D.C. Circuit court of Appeals today ruled that subsidies cannot legally flow to residents who live in States that did not set up their own health care insurance exchange (marketplace) under the auspices of the ACA. And since I started writing this post, the Fourth Circuit court of appeals reached the opposite conclusion. The litigation grinds on, and there will be no practical impact of the rulings on the functioning of exchanges or the flow of subsidies while the litigation continues, perhaps all the way to the Supreme Court.
Callie Gable, (a Duke undergrad whom I have taught is interning with Reihan Salam) has a post from last week on what might come next if the ruling that occurred today was issued. In it, I say that some states will move to set up a federal exchange via the easiest way possible (meaning that they will largely rely upon the federal website, but will either pass legislation or issue an executive order to ensure the flow of subsidies to their residents who got them to purchase private health insurance. The federal government will have lots of incentives to make this as easy as possible. Once a state has a state-based exchange, the subsidy question is no longer in doubt. It is a very technical enterprise determining exactly what constitutes a federal exchange and you can go elsewhere for detailed legal arguments, but they could include largely pointing people to the website used by the federal exchange. However, the states will have to act.
This is primarily a political question, and that is how I answered Callie, and that is how it will eventually be resolved. Here are some thoughts about what could happen:
- While this was heralded as a political win for Republicans (I guess until the fourth circuit ruling), the reality of the DC Circuit ruling if carried out fully would mean that people in 36 states would lose private health insurance that was purchased in a market place using an income based subsidy. This won’t be a political winner for Republicans for long, and I would expect Democratic candidates for Senate to use this ruling to good effect in campaigning. Something like this in North Carolina: —>”The ACA was step one, but it needs to be revised and improved. I want to make clear that North Carolinians who are newly insured with private health insurance don’t lose that coverage and I have a one paragraph bill that will do just that. My opponent is opposed to Medicaid expansion AND private insurance expansion….” That sort of thing.
- The two sides could actually have some sort of deal that included making it clear that tax credits could flow to residents in any state. Presumably there could be other changes, like getting rid of the employer mandate that no one wants, replacing the individual mandate with a variety of other risk pooling mechanisms that would be stronger than the weak mandate, altering the structure of tax credits, revising the Medicaid expansion, etc. Hard to imagine this happening prior to the 2014 election. In North Carolina, there are something like 350,000 persons who got a subsidy to purchase private health insurance, so it is not a trivial number. I have prattled on for years about how both sides need a health reform deal, there are many deals that are obvious in policy terms, etc. Eventually it has to happen…..I think.
- Some states will move ahead to set up their own exchange in a manner that heavily uses the federal website and infrastructure, while identifying those items that must be deal with by states to be a state exchange (likely related to approval of plans able to be sold on the exchange in a given state). The Fourth Circuit ruling on the same day may slow the flow of States making this move.
- Some states will hold out, with opposition to President Obama’s main policy initiative trumping all other considerations. How many is unclear. What if you played this out and imagined the ACA goes on unchanged, and this ruling held up by the Supreme Court, then it would be up to states to decide whether to set up an exchange or not. The states undertaking the current voluntary redistribution from Red to Blue states via not taking the Medicaid expansion, would have another way to couple their rhetorical disdain for the federal government, with actually saying no to the money.
Played out over many years with no revisiting of the ACA, the DC Circuit’s ruling when coupled with the Medicaid SCOTUS ruling would represent a profound calling of the bluff of the South (this is where the long term holdouts would be). Historically, we screamed about the federal government, all the way to the bank. Under this new regime, we could actually commit economic suicide if we really want to do so.