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November 08, 2014 12:00 AM

This again? Supreme Court takes up Obamacare future

Lisa Schencker
Melanie Evans
Paul Demko
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    Brendan Hoffman/The New York Times/Redux
    The raucous scene outside the Supreme Court after the justices upheld the healthcare reform law in 2012 appears headed for a replay.

    It's anyone's guess whether the U.S. Supreme Court will invalidate or uphold federal premium subsidies in 36 states when it hears King v. Burwell next year. Loss of those subsidies almost certainly would cause several million people to lose health coverage because they could no longer afford the premiums.

    But experts are already speculating about what the justices will decide—and what it would mean for insurers, healthcare providers and millions of Americans in the individual insurance market. The case is widely expected to be a nail-biting replay of the court's bitterly divided 2012 ruling upholding the constitutionality of the Patient Protection and Affordable Care Act, with Chief Justice John Roberts perhaps once again casting the deciding vote.

    The court unexpectedly announced Friday it will hear the case, which centers on whether the ACA's language allows consumers to receive premium tax credits in the 36 states that are relying on the federal HealthCare.gov exchange. It's expected that the justices will issue their ruling around June 2015.

    The court's decision to take the case is likely to create uncertainty in the healthcare industry and could shake consumers' confidence just before open enrollment for 2015 coverage begins Nov. 15. “What it means is the rest of us have to work doubly hard to make sure people understand there are still subsidies available,” said Kathleen Oestreich, CEO of Meritus, a not-for-profit insurer in Arizona.

    If the Supreme Court rejects subsidies, “then all hell breaks loose,” said Moody's Investors Service insurance analyst Steve Zaharuk.

    Following news of the court's decision to take the case, major health insurers and hospital operators saw share prices tumble. Aetna closed Friday with a 2.85% drop in its share prices from Thursday's close. Cigna Corp. saw a similar drop of 2.32%. UnitedHealth Group ended with share prices down 2.7%. WellPoint dropped 2.86%. Hospital operators saw similar declines. Shares dropped 6.51% for Tenet, 5.51% for Community Health Systems, 5.04% for LifePoint Hospitals and 4.67% for HCA.

    The case is widely expected to be a nail-biting replay of the court's bitterly divided 2012 ruling upholding the constitutionality of the Patient Protection and Affordable Care Act, with Chief Justice John Roberts perhaps once again casting the deciding vote.

    One part of the law says the tax credits are available only to Americans who enrolled “through an exchange established by the state.” But the Obama administration argues that the law's clear intention was to offer subsidies and expand coverage to Americans in every state, and that other provisions in the law support that. The law's supporters say the inconsistency in the law's language was simply a drafting error made during the tortuous process of passing the law.

    If the subsidies are struck down in the 36 states without their own exchanges, it could lead to an unraveling of the law's coverage expansion and insurance reforms, sharply driving up premiums, experts say. In total, 5.4 million Americans signed up for coverage in 2014 through the federal exchange, and the vast majority received subsidies.

    States now relying on the federal exchange could establish their own exchanges before or after the court rules. But experts say it would not be easy or inexpensive. In addition, it's unlikely Republican governors and lawmakers opposed to Obamacare would be willing to do so.

    Jillian Phillips, with the Campaign for Better Health Care, which has been lobbying for a state-based exchange in Illinois, predicted that the specter of the Supreme Court possibly striking down subsidies will motivate Illinois' Democratic-controlled Legislature to take prompt action. “If we're looking at several hundred thousand people losing their ability to afford private insurance plans, I would hope that would strongly motivate our Legislature to step up,” she said.

    The King v. Burwell case arrived at the Supreme Court after a 4th U.S. Circuit Court of Appeals panel in Virginia unanimously ruled in July in favor of the administration, saying subsidies should be allowed in all 50 states.

    About 70% of the time that the Supreme Court agrees to hear a case, it reverses the lower court's decision, said Lisa McElroy, an associate professor of law at Drexel University.

    Many had speculated that the court would wait to hear King v. Burwell until after the full U.S. Circuit Court of Appeals for the District of Columbia Circuit issues a decision in a separate but similar case, Halbig v. Burwell. Oral arguments in that case are scheduled for Dec. 17. But Erwin Chemerinsky, dean of the University of California at Irvine School of Law, said the justices may have decided they had nothing to gain by waiting for a D.C. Circuit decision.

    Kermit Roosevelt, a constitutional law expert at the University of Pennsylvania Law School, said the Supreme Court's decision likely will hinge on Chief Justice Roberts. “I could see (Roberts) either saying 'the Affordable Care Act is here to stay' and siding with the government, or 'Congress made a mistake, and we're not doing anything wrong by enforcing the law the way it's written,' ” he said.

    Follow Lisa Schencker on Twitter: @lschencker

    Follow Melanie Evans on Twitter: @MHmevans

    Follow Paul Demko on Twitter: @MHpdemko
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