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Regulation and Compliance > State Regulation

Rand: Supreme Court PPACA case could slash exchange plan use

By Allison Bell

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Killing the Patient Protection and Affordable Care Act (PPACA) premium subsidy in the states with federally run PPACA exchanges could reduce exchange plan use by 70 percent in those states in 2015, to about 4.1 million.

Evan Saltzman and Christine Eibner, analysts at the Rand Corp., have given that estimate in an analysis of the possible effects of a pending U.S. Supreme Court case on the public exchange system.

The court is preparing to hear oral arguments on King vs. Burwell (Case Number 14-114) in March. The plaintiffs in that case contend that only states with state-based PPACA exchanges can offer the tax credits that PPACA provides for exchange users with incomes between 138 percent and 400 percent of the federal poverty level.

A three-judge panel at the D.C. U.S. Circuit Court of Appeals ruled 2-1 in July 2014 that PPACA makes the subsidy tax credit available only through state-run exchanges.

A three-judge panel at the 4th U.S. Circuit Court of Appeals ruled 3-0 on the same day that the tax credit provisions in PPACA are so unclear that the secretary of the U.S. Department of Health and Human Services (HHS) has the discretion to decide how to read them.

The analysts used a statistical model to try to determine what might happen if exchange system managers are unable to offer the PPACA premium subsidy tax credits in the states with HHS-run exchanges. The analysts found that the impact of eliminating the subsidies would be more severe in states with HHS-run exchanges, because the people in states with HHS-run exchanges tend to have lower earnings and higher uninsured rates, and they are less likely to have access to Medicaid.

If the HHS-run exchanges in the affected states survive the loss of the tax credit subsidy, the typical annual cost of coverage for a 40-year-old nonsmoker could increase 47 percent, to $5,060 per year, the analysts estimate.

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