Two federal appeals courts Tuesday issued opposing rulings on the legal authority of the government to provide billions in financial aid to help consumers pay for premiums and out-of-pocket costs for health plans purchased through the Affordable Care Act’s insurance exchanges. The rulings put in limbo an estimated 7 million Americans in 34 states who signed up for a plan using the federally run exchange at healthcare.gov, including about 1 million Floridians, the great majority of whom qualified to receive financial aid from the government.
The Affordable Care Act provides subsidies to help consumers pay premiums and out-of-pocket costs: Federal financial aid was made available to all Americans who earn between 100 and 400 percent of the federal poverty level, which in 2013 ranged from $11,490 to $45,960 for a single person and $23,550 to $94,200 for a family of four. As of May 1, more than 983,000 Floridians signed up for plans on the ACA exchange, according to the Department of Health and Human Services, and more than 893,000, or 91 percent, received financial aid from the federal government.
According to the nonprofit Kaiser Family Foundation, the average subsidy per enrollee in Florida is $2,950, and the total amount spent by the federal government on premium subsidies for consumers in the Sunshine State was $1.17 billion as of March 1. Enrollment through the federal exchange during March and April far exceeded sign-ups during prior months, however, and the actual amount spent by the federal government in premium subsidies is likely to be greater.
Two nonprofits, the Robert Wood Johnson Foundation and the Urban Institute, recently quantified what’s at stake in these federal court cases for the nearly 7 million Americans who enrolled for a health plan through the federally run exchange. Urban Institute researchers estimated that 7.3 million people, or about 62 percent of the 11.8 million people expected to enroll through a federally run exchange by 2016, could lose out on $36.1 billion in subsidies.
Residents in Texas and Florida would lose the most, $5.6 billion and $4.8 billion respectively in subsidies, according to the report. At issue is the wording versus the spirit of the landmark health law. The text states subsidies are only available for plans bought “through an exchange established by the state,’’ which applies only to 16 states and the District of Columbia.
The remaining 34 states, including Florida, chose to partner with or rely entirely on the federal government to operate their insurance exchanges — and it is the subsidies provided to consumers in those states that are now in limbo. “There’s uncertainty,’’ said Steven Ullmann, a health policy expert at the University of Miami, who noted the opposing rulings by two federal circuit courts set up an almost-certain review by the U.S. Supreme Court. The Obama administration also may decide to seek a full-panel review of the D.C. court’s decision, or file an appeal. Given the opposing rulings, legal experts said, little is likely to change in the near term for the millions of Americans who bought their health plans on the federally run exchange and receive financial aid.
But there is pressure for the courts to resolve the question in the coming months, or risk a chaotic environment when open enrollment for the federally run exchanges begins Nov. 15, said John Barlament, a specialist in employee benefits at the Quarles & Brady law firm in Milwaukee. Barlament called the decision by the D.C. court a “large threat to the effectiveness’’ of the ACA. “It's really a recipe for chaos,’’ he said. The government has paid subsidies to insurers selling health plans on the federally run exchange since the beginning of the year, based on a 2012 interpretation of the health law by the Internal Revenue Service, which had ruled that the letter of the ACA contradicted the spirit of the law — to extend coverage to as many people as possible. But that interpretation was effectively overturned on Tuesday by the Washington, D.C. Circuit Court of Appeals, which ruled 2 to 1 that the health law forbids the U.S. government from providing subsidies to qualified low- and middle-income Americans who use one of the federally run exchanges. Those subsidies are based on a sliding scale of income, and they’re intended to help consumers pay their monthly premiums and out-of-pocket costs, such as deductibles and co-pays. Two hours after the Washington, D.C. court ruled, though, the Fourth Circuit Court of Appeals in Virginia — hearing a different case — unanimously upheld the legality of subsidies for insurance exchanges in every state. Those are not the only lawsuits challenging the legality of subsidies offered through the federal exchange. State officials in Indiana and Oklahoma have filed federal lawsuits based on the same issue, and those cases currently are pending in federal courts in those states.
With so much uncertainty, advocates and opponents of the health law interpreted the split rulings in different ways. Rep. Diane Black, a Republican from Tennessee, called the Washington, D.C., court’s ruling “yet another blow to the president’s disastrous health care law’’ and raised the specter of consumers having to repay their subsidies. “Anyone who has received a subsidy at all on the federal exchange could potentially be faced with having to make back payments, all due to President Obama’s recklessness,’’ Black said in a written statement. But Rep. Debbie Wasserman Schultz of Florida, who chairs the Democratic National Committee, placed the blame on governors and legislators of states that declined to create their own insurance exchanges. “People should not be penalized when their governors and legislatures refuse to set up state-run exchanges,’’ she said in a written statement. “If the D.C. court’s ruling were final it would create a horrible, disparate system of haves and have nots in Florida and nationwide that Congress clearly did not intend.’’ Advocates of the health law expressed confidence that the status quo for federal subsidies would stand. “Today isn’t different than yesterday and the next couple of days, which is that those subsidies aren’t going anywhere,’’ said Nick Duran, Florida state director for Enroll America, a nonprofit with ties to the Obama administration and that educates Americans about their healthcare options under the health law. Duran said his group would continue to urge consumers, particularly those who can still enroll because they have recently lost a job or become parents, to apply through the exchanges. “What we’re not having,’’ he said, “is a shutdown of the marketplace.’’ Health policy experts said it’s important to remember many elements of the health law would not be affected by the recent court rulings. Insurers would still be banned from rejecting consumers based on pre-existing conditions, for instance, and parents could still include their children up to age 26 on health plans. But if the judicial system upholds the D.C. court’s recent ruling, then the 34 states that rely on the federally run exchange will have to decide whether to establish their own, state-run exchanges to comply with the letter of the law. As with Medicaid expansion, which Florida has declined to accept, it is unclear how states will act when given a choice to implement portions of the ACA. Exchange consumers are not the only potential losers if the D.C. court’s ruling is upheld.
Health policy experts cautioned that the ruling could have repercussions through the healthcare system: If consumers must pay full freight for their health insurance, then fewer Americans are likely to get coverage — and those who do will need health care the most.
“They’ll drive up costs for insurers,’’ said Ullmann of the University of Miami, “and that drives up premiums.’’ Joel Hay, a professor of health policy and economics at the University of Southern California’s School of Pharmacy, said that if the judicial system upholds the D.C. court’s decision, the ACA exchanges will become unsustainable. “Everyone will have to go back to the drawing board,’’ Hay said. “You can't have something as important as this with multiple interpretations of what the federal obligations are.’’ But Ullmann also offered a bit of historical perspective, which shows landmark laws often change over time. “Medicare is a perfect example,’’ he said, noting changes to hospital and physician payments under the program in the 1980s, the advent of Medicare managed care in the 1990s, and a new coding system mandated by the health law. “If you look at Medicare today, it’s not the same program that was enacted in 1965,’’ he said. “These things continue to go on, and adjust, and iterate over time.’’