Tag Archive: U.S. Supreme Court

SCOTUS takes holistic, broad contextual reading of ACA in rejecting challenge of exchange tax credit subsidies

The U.S. Supreme Court adopted a holistic, broad contextual reading of the Patient Protection and Affordable Care Act in ruling today in King v. Burwell that premium tax credits to subsidize the purchase of individual health coverage are available on all state health benefit exchanges, including those states that opted to allow the federal government to set up the exchange.

The majority opinion by Chief Justice John Roberts is the second major decision he authored turning back significant challenges to the law. In June 2013, Roberts upheld the Affordable Care Act’s requirement that all individuals have some form of health coverage or pay a tax penalty.

The petitioners argued the Affordable Care Act permitted the tax credits only in states that established an exchange through direct state action rather than defaulting to the federal government operation of an exchange. The majority opinion however took a three-legged stool analysis in concluding the tax credit subsidies are one of three critical elements of the law’s reforms of the individual health insurance market that work together in a unified manner. Removing the subsidies in some states would thus collapse this tripartite reform scheme and result in the failure of the market that Congress clearly intended to remedy, the majority concluded.

“The combination of no tax credits and an ineffective coverage requirement could well push a State’s individual insurance market into a death spiral” of adverse selection, Roberts wrote for the majority. “It is implausible that Congress meant the Act to operate in this manner.” Roberts noted Congress passed the Affordable Care Act “to improve health insurance markets, not to destroy them. If at all possible, we must interpret the Act in a way that is con­sistent with the former, and avoids the latter.”

Two words trump four: The petitioners’ challenge turned on the last four words at Section 1311(d)(1) in the Affordable Care Act, defining an exchange as a governmental agency or nonprofit entity that is “established by a State.” But the law’s general reference to the mandatory exchanges using the term “such exchange” trumped those four words, the majority reasoned, creating parity between exchanges created by state action and those set up by the federal government: (The Affordable Care Act requires exchanges operate in all states from 2014-16 with provisions for a waiver beginning in 2017)

If a State chooses not to follow the di­rective in Section 18031 to establish an Exchange, the Act tells the Secretary of Health and Human Services to establish “such Ex­change.” §18041. And by using the words “such Exchange,” the Act indicates that State and Federal Exchanges should be the same. But State and Federal Exchanges would differ in a fundamental way if tax credits were available only on State Exchanges—one type of Ex­change would help make insurance more affordable by providing bil­lions of dollars to the States’ citizens; the other type of Exchange would not.

The majority’s legal analysis was not based on the doctrine of deference to reasonable regulatory agency interpretation of ambiguous statutory law under Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837. While that analysis is based on the premise that Congress delegated interpretation of a statute to regulators, it is not appropriate in this case, Roberts wrote:

“In extraordinary cases, however, there may be reason to hesitate before concluding that Congress has intended such an implicit delegation.” This is one of those cases. The tax credits are among the Act’s key reforms, involving billions of dollars in spending each year and affecting the price of health insur­ance for millions of people. Whether those credits are available on Federal Exchanges is thus a question of deep “economic and political significance” that is central to this statutory scheme; had Congress wished to assign that question to an agency, it surely would have done so ex­pressly.

The full opinion as well as a dissenting opinion authored by Justice Antonin Scalia is available here.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

SCOTUS should issue ruling in King v. Burwell ASAP

The U.S. Supreme Court should issue its ruling in King v. Burwell regarding the availability of advance premium tax credits in the nearly three dozen states where the federal government operates state health benefit exchanges as soon as possible. Waiting to issue its decision at or near the expiration of its current term at the end of June will produce months of needless uncertainty adversely impacting the policy planning of the states with federally facilitated exchanges (FFEs), particularly given that many of their legislatures are in session now and considering contingencies including establishing state-based exchanges should the subsidies be ruled illegal in those states.

If the subsidies are found to be contrary to the Patient Protection and Affordable Care Act — even though there’s at least an even chance they will not — states will need sufficient time to authorize and set up their own exchanges and select exchange qualified health plans prior to the start of plan year 2015 open enrollment on November 1. Health plan issuers also need to know if the subsidies will be available in order to make decisions as to what if any plans they will offer in the affected FFE states. Finally, with Congress trapped in partisan gridlock, there is little likelihood of a quick fix from the legislative branch of the federal government if the subsidies are cut off in the FFEs. It’s up the the judiciary to end the uncertainty. A rapid ruling would also be consistent with the high court’s expedited decision to hear the case before a full split could develop among the U.S. circuit courts of appeal.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Market failure in individual, small business health insurance market segments forces insurer to act

Aetna CEO Mark Bertolini reveals to Sarah Kliff of The Washington Post’s Wonkblog that a strategic review Aetna undertook in 2005 showed the individual health insurance market segment failing and the small group segment in decline.  Market failure can be a strong motivator to act — and will remain a mortal threat notwithstanding how the U.S. Supreme Court opines this week on the constitutionality of the Patient Protection and Affordable Care Act.

Some excerpts from Kliff’s post:

 “We saw an individual market in inexorable decline and, on the small group side, fewer were offering benefits and costs were rising. We knew we had to change something,” Bertolini said.

Aetna has a strong business reason to create a cheaper insurance product: Namely, getting more people to buy it. That motivation stays in place regardless of what happens with the Supreme Court this month.

“We’re really working right now on the underlying cost of health care,” he says. “These investments we’re making are about finding a different way to make models work. We’re committed to fixing that, and feel like we need to fix that.”

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Law school article suggests Supreme Court could reject challenge of PPACA’s constitutionality

In less than one month, the U.S. Supreme Court is expected to issue its ruling on the constitutionality of the Patient Protection and Affordable Care Act (PPACA).  The high court will decide what’s referred to as a “facial challenge” to the law, which as the name suggests means a claim the law is unconstitutional on its face.  The other test of a statute’s constitutionality is an “as applied” challenge.  In an as applied challenge, the constitutionality of the law itself isn’t called into question. Rather, the contention is the manner in which the law is being implemented is unconstitutional.

Facial challenges are tougher to win because there are no underlying facts on which to judge if the law is being applied such that it doesn’t violate the Constitution.  Plus they face an uphill battle because the courts presume statutes to be constitutional as written.

An indication that the current Supreme Court headed by Chief Justice John Roberts may not be inclined to rule the PPACA unconstitutional on its face appears in this 2009 Columbia Law School white paper written by Gillian Metzger.  The year before the PPACA was enacted, Metzger observes:

One recurring theme of the early Roberts Court’s jurisprudence to date is its resistance to facial constitutional challenges and preference for as-applied litigation. On a number of occasions the Court has rejected facial constitutional challenges while reserving the possibility that narrower as-applied claims might succeed. According to the Court, such as-applied claims are ‘the basic building blocks of constitutional adjudication.’ This preference for as-applied over facial challenges has surfaced with some frequency, across terms and in contexts involving different constitutional rights, at times garnering support from all the Justices on the Court. Moreover, the Roberts Court has advocated the as-applied approach in contexts in which facial challenges were previously the norm, suggesting that it intends to restrict the availability of facial challenges more than in the past.

If this continues to reflect the current philosophy of the Roberts court, it could well reject the challenge to the PPACA and leave the statute and its dual mandates on health insurers and citizens to sell and have health coverage, respectively, intact.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

UCLA research note: Elimination of PPACA’s coverage mandate would accelerate adverse selection

If the U.S. Supreme Court severs a keystone element of the Patient Protection and Affordable Care Act that mandates all Americans have public or private health coverage by 2014 but leaves intact another key provision requiring insurers and managed care plans to accept all applicants without medical underwriting, payers would experience adverse selection and premium rates would necessarily rise in response, making coverage less affordable.  That undermines a key objective of the 2010 law designed to reduce the number of people who are medically uninsured, the UCLA Center for Health Policy Research concludes in a research note issued this month.

The note determined this scenario would result in only a small reduction in the number of medically uninsured Californians by 610,000 or 13 percent of the eligible uninsured by 2019. Eliminating the minimum coverage requirement while leaving in place the PPACA’s modified community-based rating where coverage is guaranteed to all applicants would not allow payers to avoid covering less healthy individuals more likely to need expensive medical care.

The UCLA research note effectively concurs with an amicus curiae brief in the Supreme Court case filed by health insurers and plans who contend the PPACA’s coverage mandate is designed to work in conjunction with community-based versus individual medical underwriting and therefore cannot be excised from the law.  “The result would be a ‘marketwide adverse-selection death spiral’ that would thwart rather than advance Congress’s goal of expanding affordable health care,” they warn.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

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