The Democratic-controlled Illinois Legislature appears poised to approve legislation this week establishing a state-based insurance exchange.
The bill has gained urgency because of the U.S. Supreme Court's decision to take up the King v. Burwell case, which could invalidate federal premium subsidies in the 34 states, including Illinois, that did not establish their own exchanges and instead rely on HealthCare.gov for enrollments.
But Illinois is the exception when it comes to states without their own exchanges. The Urban Institute has estimated that 7.3 million low-income Americans would lose access to subsidies worth $36.1 billion in 2016 if the court rules that people in the 34 states are not entitled to tax credits under the Patient Protection and Affordable Care Act to help them buy coverage. Experts predict many if not most of those people would then drop their insurance because they would find it unaffordable.
Despite the high stakes, most states are taking a wait-and-see approach to the lawsuit, which is expected to be decided in June.
The only other state that has made moves to establish its own exchange is Arkansas. But there, a new anti-ACA Republican governor is replacing a pro-ACA Democrat.
Ron Pollack, executive director of Families USA, which supports the ACA, said that governors and legislators have shown little urgency to act because most don't believe the subsidies will be struck down by the courts. That's created little incentive to address a knotty issue that may ultimately prove moot. Setting up and running an exchange requires funding, and elected officials are leery about being accused of raising taxes.
Illinois state Rep. Robyn Gabel, a Democrat and chief sponsor of the exchange legislation, said that it's “critical” to pass the exchange bill because roughly 160,000 Illinoisans could lose their premium tax credits if the Supreme Court ultimately sides with the plaintiffs in the lawsuit and rules that the language of Patient Protection and Affordable Care Act does not allow subsidies in states that did not “establish” their own exchange.
Reform supporters want the bill passed this year while Democratic Gov. Pat Quinn is still in office to sign the bill. Illinois' governor-elect, Republican Bruce Rauner, is an opponent of the Affordable Care Act.
Joel Ario, managing director at Manatt Health Solutions, said he doesn't think it's likely that the Supreme Court's decision to take up the subsidy lawsuit will spur states to act. “Unfortunately, I see lines hardening in the short run,” he said. “This lawsuit leaves the states dangling while the Supreme Court debates whether to pre-empt the political process.”
At issue in the King case is one line in the federal healthcare law, which states that premium tax credits are available only to Americans who enrolled “through an exchange established by the state.” Plaintiffs have argued that this means individuals in states that rely on HealthCare.gov for enrollments aren't eligible for financial assistance. But the Obama administration argues that the law's clear intent was to offer subsidies and expand coverage to Americans in every state, and that other parts of the law support that.
But it's unclear what minimum steps a state must take to switch from relying on the federal exchange to having its exchange be considered state-run. The exact parameters will depend on how the Obama administration interprets the law's requirements and how the Supreme Court ultimately rules.
Two states, Nevada and Oregon, have exchanges that the CMS considers state-based even though they are no longer handling their own enrollments. Both states opted to switch to HealthCare.gov after disastrous technological problems during the first open-enrollment period. Another state, New Mexico, has opted to use the federal website for enrollments for the second straight year, but it is still considered a state-based exchange. Officials in seven states with so-called state-partnership marketplaces argue the exchange in their state should be considered a state-established exchange because the state carries out some of the marketplace functions.
Kevin Lucia and Justin Giovannelli, researchers with Georgetown University's Health Policy Institute, argue that it might not be necessary for states to go through the costly, difficult process of establishing their own enrollment portal to qualify as a state-based exchange. “State do need to establish legal authority and craft approaches for funding and governance,” they wrote in a blog post. “But soup-to-nuts development and execution of certain functions, including an enrollment website and related IT systems, need not be a bar to marketplace creation.”
The most likely candidates to switch to a state-based exchange would seem to be the seven states, including Illinois, that operate partnership exchanges. Those states already take responsibility for some aspects of the exchange, such as overseeing outreach efforts. But they rely on HealthCare.gov for actual enrollments. Few of those states, however, appear eager to move forward with an exchange.
“Increased uncertainty for Iowans due to Obamacare is the common theme from the court decisions,” said Jimmy Centers, a spokesman for Iowa Republican Gov. Terry Branstad, in a written statement. Iowa has a partnership exchange. “Gov. Branstad has always worked to make healthcare insurance more predictable and affordable for Iowa families and businesses, and a hastily built exchange would not support either of those goals.”
A representative for the Department of Insurance and Financial Services in Michigan, which also has a partnership exchange, said there has been no change in the state's plans concerning its exchange since the Supreme Court decided to take the King case. “We are reviewing the impact of the ruling, how it will impact Michigan consumers, but there is still a lot that is unknown at this point,” said Caleb Buhs, in a written statement.
States faced a Nov. 14 deadline to apply for federal funds to help establish an exchange. A CMS representative declined to say how many states had filed applications ahead of the deadline.
But Arkansas and Illinois appear to be the only states taking steps to establish their own marketplaces. Arkansas was already moving ahead with plans to establish a state-based exchange prior to the Supreme Court's decision. It is seeking $126 million in federal grant money to help pay for its development. Arkansas expects to have a small-business exchange operating in 2016, with the individual marketplace established the following year.
Republican state Sen. David Sanders, co-chair of the Arkansas Health Insurance Marketplace Legislative Oversight Committee, said his state is not reacting to the Supreme Court's actions but merely trying to find the best solution for Arkansas. “We think we can predict how the court will rule,” Sanders said. “But the court in its wisdom has often surprised those who are in the business of making predictions about what they're going to do.”
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