Health insurers are counting on policymakers to craft a workaround to keep federal subsidies flowing to low- and moderate-income Americans if the U.S. Supreme Court rules against the Obama administration.
But without a plan B for that scenario, insurers would be sitting front row as the individual marketplaces collapse from higher premiums and a sicker patient base.
The Supreme Court heard oral arguments Wednesday from plaintiffs and the government in King v. Burwell. Plaintiffs in the case argued the Internal Revenue Service can only issue health premium tax credits to people who buy health insurance through exchanges “established by the state” and not those that chose to rely on HHS to run their insurance marketplace. The government said the intent of the law authorizes premium subsidies in any exchange, state or federal.
Some health insurers have vaguely hinted they would consider contingency plans if the Supreme Court rules in favor of the plaintiffs. Anthem likely will go through “some scenario planning between now and the ruling,” CEO Joseph Swedish told investors at the J.P. Morgan Healthcare Conference in January. He did not provide any details.
Blue Cross and Blue Shield of Tennessee said in a statement Wednesday that it didn't want to speculate on the King case. “However, we feel it is critically important that as many Tennesseans as possible get and stay covered,” the insurer said.
Actuaries are hoping HHS will give insurers some leeway for setting 2016 premium rates if subsidies are nixed since rate filings are due in May. The Supreme Court isn't expected to hand down its opinion until June. The American Academy of Actuaries specifically asked if insurers could submit two sets of rates or amend their rate filings later in the year.
Mark Rust, a partner at Barnes & Thornburg who advises Illinois co-op insurer Land of Lincoln Health, said he hopes one of two scenarios plays out if subsidies are struck down. First, congressional Republicans have shown a willingness to create a transition period for people who would lose health coverage, though they offered few specifics. Even conservative Justice Samuel Alito asked about such an idea in Wednesday's arguments, saying: “Would it not be possible if we were to adopt [the] petitioners' interpretation of the statute to stay the mandate until the end of this tax year as we have done in other cases?”
The other option involves states using the federal exchange switching to a state-based exchange, but that process is not as simple as some might think. Rust said Illinois has a better shot than others of creating its own exchange because the state already handles some of the operations. "Land of Lincoln is very confident that a political solution will be found to protect those members," Rust said.
Kevin Lewis, CEO of Maine Community Health Options, another not-for-profit co-op insurer funded through loans authorized by the Affordable Care Act, said he, too, hopes states would act to protect the subsidies. His health plan operates in Maine and New Hampshire, which both rely on HHS to some degree to operate their exchanges. “It would behoove the legislatures in both states to consider a state-based exchange that contracts with the federal exchange,” Lewis said.
Several think-tank analyses show the individual health insurance markets would become unstable. Premiums would rise almost 50%, and millions of people would drop coverage because it would become unaffordable. Only sicker patients would likely hold onto coverage, which would doom the finances of insurers who stick it out.
Insurers have not said if they would pull out of the exchanges, but a ruling for the petitioners would force them to explore that option. “The question then becomes, do they participate in the market?” said Cori Uccello, senior health fellow at the American Academy of Actuaries. “If they are not able to get premiums that are adequate to meet their expected claims, then that's something I imagine they would consider.”
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