Idaho’s business community is certainly familiar with the Affordable Care Act (ACA), sometimes referred to, often derisively, as “Obamacare.” With the United State Supreme Court’s decision June 25 in the case of King v. Burwell, the ACA again survives a full-court attack by its widespread critics. As in June 2012, when the Supreme Court upheld the constitutionality of the ACA by finding the individual mandate to be a tax, the June 25 decision leaves intact the billions of dollars of federal subsidies for health insurance premiums paid on behalf of millions of Americans who could otherwise not afford health insurance.
In general, the ACA seeks to lower the number of uninsured by: (1) requiring Americans to obtain insurance coverage; (2) requiring many employers to provide coverage or face penalties; and (3) establishing health insurance exchanges where subsidized insurance can be purchased by individuals and families.
In Idaho and nationwide, the ACA is well on its way to reducing the number of uninsured Americans. In fact, 8.6 million Americans, including almost 70,000 Idahoans, receive financial assistance from the federal government through subsidized health insurance purchased on the exchanges. Subsidies typically account for about 72 percent of the premium cost for the policies purchased on the state and federal exchanges.
The ACA offered every state the opportunity to create its own exchange, and if a state did not do so, the ACA provided that the federal government would establish and operate an exchange for that state’s citizens. In 2013, Idaho’s Legislature established the Idaho Health Insurance Exchange, known now and operating as Your Health Idaho. Unlike Idaho, 34 other states declined to implement the ACA and instead rely on the federal exchange, which is often called HeathCare.gov.
The ACA established subsidies for health insurance coverage by modifying Section 36B of the Internal Revenue Code. That Code section states that tax credits shall be given to any applicable taxpayer, so long as the taxpayer has enrolled in an insurance plan through an “Exchange established by the State.” Despite the language that appears to limit subsidies to exchanges established by the individual states, the IRS interpreted this language to allow subsidies for eligible individuals who purchased insurance through exchanges established by both the states (like Idaho’s) and through the federal exchange established and operated by the federal government.
The petitioner in King challenged the IRS interpretation of this language from the ACA. King argued to the court that the federal exchange was not an “exchange established by the state,” and therefore subsidies should not be available to those individuals purchasing insurance through the federal exchange. Without such subsidies, King, along with millions of others, should be exempt from the individual mandate because the individual mandate only applies if consumers fail to purchase coverage that is “affordable.” Without the subsidized coverage available on the exchanges, King and many others do not have access to “affordable” coverage and are thus eliminated from the individual mandate.
The Supreme Court, sometimes referred to as SCOTUS, sided with the Obama administration and found that the ACA, when viewed as a whole, supported the conclusion that Congress intended that all consumers have access to subsidized coverage. The court explained that the ambiguity of words is often only seen when placed in context. In the context of the ACA as a whole, the words in Section 36B become ambiguous because if given their “most natural meaning,” no individuals on the federal exchange will be eligible for tax credits. Yet, “the Act clearly contemplates that there will be qualified individuals on every Exchange.” After walking through provisions of the ACA which support such contemplation, the court began its analysis of the section’s proper meaning.
Through its analysis, the court explained how the ACA was created to help all individuals, and how adopting King’s position would cause the act to operate quite differently between states. Furthermore, the combination of no tax credits in some states and an ineffective individual mandate would cause a state’s insurance market to completely crash. The court concluded by stating that “[a] fair reading of legislation demands a fair understanding of the legislative plan,” which in this case was to improve insurance markets, “not destroy them.”
As in other cases, Justice Scalia was animated in his dissenting opinion. In that dissent, Justice Scalia stated “[w]e should start calling this law SCOTUScare,” due to the Court’s “somersaults of statutory interpretation” that saved the Act from unconstitutionality in 2012, and have now saved the insurance marketplace by dramatically expanding the Act. While Scalia and two other Justices agreed with King, the majority of the court found the language ambiguous, such that it was the court’s “task to determine the correct reading of Section 36” and evaluate the intent of the ACA as a whole.
Prior to today’s decision, there was a well-founded fear that a decision in King’s favor would lead to the collapse of the entire ACA. Without reducing the number of uninsured, the cost savings anticipated by the ACA and used to fund the ACA could have led to the demise of the ACA. However, regardless of your position on the ACA, the result of today’s decision is not ambiguous: tax credits are available to all eligible individuals regardless of whether they purchase insurance through a state or federally-run exchange. Idaho’s health insurance exchange will not be threatened by the possible collapse of the ACA and its exchanges, including Idaho’s, as it would have had the critics of the ACA prevailed in the King case.
In addition, two other points are clear from the opinion. First, if the critics of the ACA are to have success in defeating or limiting its scope, that success will come through legislative repeal and not through the courts. Maybe those in favor of the repeal of the ACA will prevail at the ballot box in November of 2016.
Second, and more importantly, Idaho’s businesses will remain the beneficiaries of the ACA’s reduction in the number of uninsured residents of Idaho. Each year at renewal time, Idaho’s businesses face the ever-increasing costs of providing health insurance for their employees. However, many businesses fail to realize that a portion of each health insurance premium reflects the costs associated with health care provided to Idaho residents who have no insurance. Idaho’s health care providers write off millions of dollars of uncompensated care each year for services provided to patients with no insurance. Those very real costs are then passed on to the health insurance companies that have no choice but to include these costs in their insurance premiums. The much-maligned ACA includes specific provisions (like subsidized coverage available on exchanges) which are intended to reduce the costs for uncompensated care that now fall on Idaho’s business owners and their employees. The subsidized health insurance coverage provided on the exchanges, including Idaho’s, benefit Idaho’s businesses. The Supreme Court’s decision June 25 keeps that coverage intact.
Tom Mortell is a partner at Hawley Troxell and chairs the firm’s health law practice group. He is also a member of the firm’s governing board. He can be reached at email@example.com. Chelsea Porter is an associate at Hawley Troxell and a member of the firm’s health law practice group. She is also a member of the firm’s public finance practice group. She can be reached at firstname.lastname@example.org.