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On the Third Hand: Dear Supreme Court

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The U.S. Supreme Court could take until late June to announce a decision on King vs. Burwell (Case Number 14-114), and it’s still not certain whether the court will make a decision that deals with the merits of the case.

Meanwhile, insurers are mostly stuck with the prices they set for individual major medical insurance and small-group major medical insurance for 2015, whether those products are sold through a Patient Protection and Affordable Care Act (PPACA) public exchange or outside the exchange system, in a state with a PPACA exchange established by the U.S. Department of Health and Human Services (HHS) or by a state government.

Timelines vary from state to state, but insurers are already creating health insurance form and rate filings for 2016.

Insurance company actuaries are already having to try to come up with 2016 rates at a time when they’re under pressure from both the left and the right to give everyone a pony, a unicorn and a rainbow palace without imposing any cost increases or mandates on anyone; when they have no idea whatsoever whether any of the three PPACA risk-management programs will work; and when they have only a vague idea how PPACA provisions affected claims in 2014.

Meanwhile, they face the possibility that anything they think they might know about PPACA World could turn upside down in an instant, in June, if someone looks at Chief Justice John Roberts or Justice Anthony Kennedy the wrong way, or serves them a bad breakfast, or runs a horoscope that tells them to try a new approach to life.

The justices could simply save or kill the ability of HHS exchanges to offer PPACA premium tax credit subsidies, but it seems from Kennedy’s remarks during oral arguments as if the court could do something unexpected, such as finding a way to declare most or all of the PPACA provisions that limit commercial health insurance underwriting to be unconstitutional.

Even if all the justices do is get rid of the HHS exchanges’ ability to offer the premium tax credit, that move could have unexpected consequences. One health policy watcher put out a statement declaring that California residents would be safe, because California has a state-based exchange and could still offer subsidies. But what would California health insurers do, in that situation, if moderate-income Arizona residents with HIV and imminent organ transplant needs poured across the border and applied for coverage? 

Certainly, some readers would cry if the Supreme Court rules against the Obama administration on King vs. Burwell. Many more would cheer.

Either way: Given the uncertainty about how Congress and HHS might react to a game-changing ruling, it seems as if the prudent response for a commercial health insurer is to sit out of the individual health insurance market entirely it sees how federal and state regulators respond to the ruling. In theory, in states with rigid rate-review schedules, that could mean staying out of the market for all of 2016.

Issuers of short-term health insurance products and other products beyond the reach of the PPACA major medical underwriting rules might see chaos in the individual major medical market as a great chance to pick up share, but it seems as if, even though they would have the benefit of being able to use medical underwriting to limit risk, they would also face a flood of high-risk applicants. Burning houses might sneak in.

So, I think the Supreme Court should signal, as quickly as possible, as in, in two weeks, that it will craft any ruling it issues in such a way as to let HHS, states, exchanges, insurers and consumers use any HHS interpretations in place as of March 1, 2015, to govern the market until insurers are able to put information about the ruling, and state and exchange responses to the ruling, in their rates. Or, if the court wants to make some other transitional relief arrangement, such as setting up a process for insurers to work with HHS to develop a transitional relief system, it should communicate that as quickly as possible. If there’s a serious possibility that the court would change the rules without establishing a transitional period, signal that. But, whatever the court thinks might happen: Try to give insurance company rate setters as much advance warning as they can.

On the one hand, PPACA opponents could say that the Obama administration brought this situation on everyone’s heads by arrogantly interpreting PPACA the wrong way. Opponents of the law might say, further, that the big insurers helped shape the law and the implementing regulations, and that the big insurers now have to lie in the bed that they made (and that the Supreme Court might unmake). And that it’s not the court’s job to baby insurance companies affected by changes in the interpretation of a hotly contested new law.

On the other hand, smaller insurers, brokers and typical individual health insurance policyholders had little or no effect on the drafting or implementation of PPACA. A need to punish HHS and the Internal Revenue Service for interpreting a long, confusing law incorrectly does not seem to justify wiping out part or all of the individual health insurance market in 2015 and 2016.

On the third hand, given the current state of affairs, maybe even the justices on the Supreme Court are so bitterly divided that they’d rather see millions of consumers go without health coverage for part or all of 2016 rather than compromise with colleagues who see things differently. In that case, the sudden collapse of the individual health insurance market may be just the first of many policy disasters to come.


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