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Regulation and Compliance > State Regulation

What counts as a "state-established" PPACA exchange?

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An analyst at the American Enterprise Institute (AEI) has rejected one popular idea for dealing with a U.S. Supreme Court ruling against the Obama administration in King vs. Burwell (Case Number 14-114).

The plaintiffs in the case say the Patient Protection and Affordable Care Act (PPACA) lets only an exchange established by a state offer the PPACA premium tax credit subsidy to exchange plan buyers.

An exchange established by the U.S. Department of Health and Human Services (HHS) cannot offer the premium tax credit, the plaintiffs say.

See also: Obamacare isn’t dying. What now?

Some PPACA supporters have suggested that HHS could get around a defeat at the Supreme Court by simply having as many states as possible pass bills hiring HHS to manage their exchanges.

Those PPACA supporters say the states in that situation, would be establishing the exchanges, and that HHS would simply be the administrator.

Tom Miller, the AEI analysts, say a state has to do more than authorize HHS to provide exchange service to have a “state-established exchange.”

Miller outlined his views in November for the Health Care Reform Regulatory Alternatives Working Group, an arm of the National Association of Insurance Commissioners (NAIC). The working group included a summary of Miller’s presentation in a batch of draft meeting notes on the agenda for approval at the NAIC’s upcoming spring meeting in Phoenix.

Miller, a health care economist, told the working group that he believes the statutory requirements for the PPACA exchanges would requires a state to do more than award an exchange administration contract to HHS.

A governor and a state legislature would probably have to set up an exchange, and an exchange funding mechanism, Miller said.

To count as a true state-established an exchange, an exchange would have to have a governing board, and that most contracted functions would have to be approved by someone in the state.

The requirements would make having a “total shell operation” difficult, Miller said, according to the summary.

Miller also talked about the mechanics of how a Supreme Court ruling might affect premium subsidy payments. Implementing a Supreme Court ruling against the Obama administration would probably take time, because the Internal Revenue Service would probably implement the ruling by withdrawing and, eventually, replacing, an IRS rule. Replacing the rule would take time, and no one would have any political interest in trying to claw back the premium subsidies already paid for coverage for low-income and moderate-income consumers, Miller said.

See also: GOP group preps PPACA alternative


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