Latest Obamacare Litigation—A Summary for Anesthesiologists
Some of the most controversial provisions of the Affordable Care Act (ACA) are those that require individuals to either sign up for health insurance or to pay a tax. Differing interpretations of the statutory language regarding the tax credit or “subsidy” that would enable lower-income individuals to afford coverage have given opponents of ACA a hook on which to hang a small but powerful legal weapon. Contrary to the claims (and hopes) of some observers, recent federal Appeals Courts decisions are not the death knell for Obamacare, however.
The statute provides for a premium tax credit for “health plans offered in the individual market within a State which cover the taxpayer, the taxpayer’s spouse, or any dependent (as defined in section 152) of the taxpayer and which were enrolled in through an Exchange established by the State under 1311.” The question is whether tax credits would only be available for policies purchased through exchanges established by the state, or whether they would also be available in states that had deferred to the Federal government to establish and run their exchanges. There are 15 or 17 of the former, including the District of Columbia, and 34 or 36 in which the Federal Department of Health and Human Services (HHS) is operating the exchange. (Even the number of states in each category can give rise to controversy. Whether New Mexico and Idaho have their own exchanges or HHS-“supported” exchanges is a technical issue raised here only to illustrate the complexity of the subject matter.)
On July 22, 2014, in Halbig v. Burwell, the federal Court of Appeals for the D.C. Circuit ruled 2-1 that the Federal government may not offer individuals subsidies for health insurance bought through a federally run exchange. Two hours later, in King v. Burwell, a unanimous three-judge panel of the Fourth Circuit Court of Appeals in Virginia went the other way, upholding a district court ruling that the IRS had the authority to extend the tax credits to patients enrolled through the HHS-operated Healthcare.gov exchange.
In the 36 states served by the Healthcare.gov exchange, nearly 90 percent of individuals who bought coverage—nearly five million people—received subsidies, which reduced their premiums by an average of 76 percent. Consumers in Florida, Georgia, Mississippi, Alaska and Missouri pay less than 20 percent of their premiums, on average. (“Upcoming Federal Court Decision Could Mean Premium Increases for Nearly 5 Million Americans,” Avalere Health.)
The Robert Wood Johnson Foundation/Urban Institute has calculated that by 2016, 11.8 million individuals are expected to enroll in the 34 federally-run exchanges, with 7.3 million of those people estimated to receive federal subsidies. If the Halbig decision stands, this would translate into “a loss of $36.1 billion in 2016 of funds that would otherwise go to individuals and families with incomes below 400 percent of the federal poverty level, with spillover effects to state economies also expected from the sizable reduction in federal dollars flowing into these states. Losses would be as high as $4.8 billion in Florida and $5.6 billion in Texas.”
As a consequence, loss of the subsidies would increase the number of uninsured substantially. Without the subsidies, premium costs for many of the residents of the affected states would exceed eight percent of family income, exempting them from the penalties associated with the individual mandate. Moreover, because the employer mandate hinges on the ability of workers to buy subsidized coverage through an exchange if they cannot afford the coverage offered by their employer, implementation of the Halbig decision would negate the employer mandate.
Additionally, the Urban Institute report notes, the ACA’s insurance reforms prohibiting discrimination against those with medical problems are predicated on the individual mandate. “However, if the pool shrinks appreciably without the subsidies available to draw in many healthy individuals, insurers are likely to advocate strongly for the repeal of these new protections. And they would have a strong case to make.”
In the near term, the subsidies will continue because of the split of opinion between the D.C. and the Fourth Circuit Courts of Appeal. The D.C. Circuit Court found the statutory language to be unambiguous and valid on its face; the Fourth Circuit found it unclear and considered the entire purpose of the ACA in interpreting the language. This kind of schism is not unusual and frequently the remedy lies in an appeal to the United States Supreme Court. First, though, the Obama administration has requested a full “en banc” reconsideration by all 11 judges on the D.C. Circuit Court. Many observers expect the result to be a reversal on the grounds that sloppy draftsmanship of a single provision in the ACA does not warrant eviscerating healthcare reform. A majority of the 11 judges are Democratic appointees; the two judges in the Halbig majority are Republicans. (Yes, party affiliation matters a great deal.)
Even if the D.C. Circuit affirmed the Halbig decision en banc, a prerequisite to Supreme Court review, it could take several years for the case to reach the Supreme Court. Most commentators consider it extremely unlikely that the Court will gut Obamacare then. Remember that Chief Justice John Roberts ruled the individual mandate constitutional in 2012. The same political considerations underlying that ruling—placing health insurance again out of reach of millions of Americans who will have come to count on it would be an unpopular development—will prevent the larger upheaval that Halbig would create.
Thus newly-insured patients are apt to continue to have coverage, with all that that means for anesthesiologists and other providers who care for them. We trust that that is good news for our readers.