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Life Health > Health Insurance

King vs. Burwell: What, if anything, should Congress do?

By Allison Bell

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Sen. David Vitter wants to hear proposals for what Congress should do if the U.S. Supreme Court blocks the ability of the public exchange system to offer premium tax credit subsidies in the HealthCare.gov states.

Vitter, R-La., chairman of the U.S. Senate Small Business and Entrepreneurship Committee, held a hearing on the premium tax credit case, King vs. Burwell (Case Number 14-114).

The drafters of the Patient Protection and Affordable Care Act (PPACA) created the tax credit system in part to help low-income people pay for coverage, and in part to compensate for the effects PPACA rules on the cost of coverage.

PPACA now forbids major medical issuers from considering health status when issuing individual coverage, or using health status factors other than age and tobacco use when pricing individual coverage. PPACA also requires issuers to cover a standardized essential health benefits package and caps enrollees’ annual out-of-pocket pockets.

See also: Consultants: PPACA not one big happy luau

Regulators have applied the PPACA limits to all individual major medical coverage, whether the coverage is sold inside the exchange system or outside the exchange system.

The PPACA rules have led to dramatic increases in the full, unsubsidized cost of health insurance for young, healthy consumers in states that allowed the use of medical underwriting before 2014.

More than 75 percent of PPACA exchange plan buyers have been using the tax credit subsidy to pay the premiums.

The plaintiffs in King vs. Burwell say PPACA makes the tax credit available only in states that establish their own exchange programs, not in the states in which the U.S. Department of Health and Human Services (HHS) is offering exchange services through HealthCare.gov. 

HHS officials say PPACA gives all state public exchanges authority to offer the tax credit; that, if there is any ambiguity, HHS Secretary Sylvia Burwell has the authority to clear up the ambiguity; and that, even if the court believes that the text of the law fails to give the HealthCare.gov exchanges authority to offer the tax credit, or Burwell the authority to interpret the law that way, the court should let the HealthCare.gov exchanges offer the tax credit anyway, to carry out the obvious intent of the PPACA drafters.

Analysts at the Urban Institute and other organizations have argued that, if the court sides with the plaintiffs in King vs. Burwelll and blocks HealthCare.gov users’ access to the tax credit program, the majority of the current exchange plan users would have to drop their coverage. The consumers who kept their coverage in the HealthCare.gov states would be older and sicker, and the poor health of the remaining enrollees could lead to a “death spiral,” or a self-perpetuating cycle of premium increases and enrollment decreases, analysts say.

Vitter brought in witnesses to ask them for ideas about what to do if the Supreme Court does kill HealthCare.gov’s ability to ask the tax credit.

See also: Supreme Court justices are getting ‘grumpier,’ study finds

Vitter said he wants to know what Congress should do to help those who might be left in the lurch if tax credit program rules suddenly change.

“How can we best help our fellow citizens?” Vitter asked.

The witnesses, and lawmakers, spent most of their time, talking about which side should win the case, and what the effects of a ruling against HHS might be, but they also spent some time talking about their ideas for how Congress should respond to a ruling against HHS.

For a look at some of what they said, read on.

Volcano erupting

1. Figure out how to get the premium tax credit subsidies back.

Linda Blumberg, a health policy specialist at the Urban Institute, said elimination of the PPACA tax credits in the 34 HealthCare.gov states would cause the number of uninsured people in those states to increase by about 8.2 million in 2016, and the median, unsubsidized cost of individual and family coverage to increase about 55 percent.

To avoid harm to small firm employees and other people affected by a ruling against HHS, “New legislation to re-instate [PPACA's] financial assistance in any state in which it would be prohibited would be required to reverse such damage,” Blumberg testified. 

See also: 10 states where the Supreme Court may help short-term health sales

(Image: USGS photo)

IRS

2. Hold oversight hearings on the activities of the IRS.

Michael Cannon, a health policy specialist at the Cato Institute, said Congress should hold hearings on the activities of the Internal Revenue Service (IRS).

The IRS has violated the limits PPACA places on its authority, Cannon said.

“Oversight hearings would showcase that those limits are clear and unambiguous,” Cannon said.

The IRS originally included a provision limiting access to the tax credit subsidy to consumers using an exchange “established by a state,” but it took out that provision in response to objections from a political appointee at the Treasury Department, Cannon said.

See also: House panel: Infighting caused HealthCare.gov launch disaster

Dollar bill

3. Create a premium tax credit that goes straight to the consumer.

Jeffrey Anderson, executive director of The 2017 Project, said Congress should replace the current mandates, subsidies and exchange system with subsidies for risk pools for people with health problems, and simple tax credits paid directly to consumers.

Getting rid of the current income-based eligibility system would simplify the tax credit system and cut the cost, Anderson said.

His group has suggested that the tax credit amount could be $1,200 for adults under age 35; $2,100 for people ages 35 to 49; and $3,000 for people ages 50 and older.

Anderson said Congress should replace the current health insurance mandates and plan approval system with requirements for consumers to use the new, simpler tax credits to pay for coverage that meets minimum quality standards.

Going to a standardized tax credit system and eliminating other PPACA requirements could save $1.1 trillion per year, and it would be better for the moderate-income consumers who earn too much to get help from the current subsidy system, Anderson said.

See also: Republicans propose group health exclusion cap 

Sylvia Burwell

4. Get Burwell to use PPACA authority to ease problems.

Cannon argued that worries about what the King vs. Burwell ruling will do to the individual health insurance market are part of an HHS strategy to intimidate the Supreme Court. 

See also: On the Third Hand: Dear Supreme Court

“There are lots of things the administration could do” to protect consumers, Cannon said.

He said Burwell could protect consumers by creating a special enrollment period (SEP) for consumers affected by an elimination of the HealthCare.gov tax credits, to give them a chance to switch to cheaper coverage.

The Obama administration also could create a hardship exemption for the consumers affected by the ruling, to keep them from having to pay the PPACA individual mandate penalty because they are no longer able to afford minimum essential coverage (MEC).

Federal officials also could protect HealthCare.gov user access to the tax credit until the end of 2015, by having HHS shift to paying exchange plan issuers the tax credit money on an annual basis, rather than a monthly basis. HHS could then send insurers the tax credit money for the rest of the year and buy time that way, Cannon said.

“I think it would be an unethical thing for them to do,” Cannon said, but he said HHS officials could make the argument that the letter of the law was on their side.

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