The U.S. Supreme Court has dismissed the challenge to the Affordable Care Act's subsidies in federally-facilitated exchanges, a victory for the Obama Administration but certainly not the last health reform battle.
By a vote of 6-3, the Supreme Court sided with the Obama Administration and rejected the argument levelled by conservative activists that the ACA's language of "established by a state" barred the federal government from subsidizing health insurance unless the plans were sold in a state-based exchange.
"Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them," wrote Chief Justice John Roberts. "If at all possible, we must interpret the act in a way that is consistent with the former, and avoids the latter."
Three Justices, Samuel Alito, Antonin Scalia and Clarence Thomas, bought at least some of the "established by a state" argument crafted by Cato Institute fellow Michael Cannon and Case Western Reserve law professor Jonathan Adler. ("Pure applesauce" is how Scalia described the majority ruling in his dissent.)
Cannon and Adler partnered with conservative attorneys general like Scott Pruitt of Oklahoma and found as one of several plaintiffs David King, a 64-year-old Vietnam War veteran in Virginia who believed that he shouldn't have to comply with the individual insurance mandate since his state declined to create its own exchange. The same logic should apply to businesses and the employer coverage mandate, the lawsuit argued. (The "battle to set in place a healthcare system that works for all Americans is far from over," wrote Cannon, lamenting the decision.)
Some six million Americans in 34 states that have not run their own exchange, including Florida, Pennsylvania and Texas, were at risk of losing their subsidies, and the national individual health insurance market would have been threatened with chaos, if not a death spiral.
No doubt the healthcare industry is breathing a sigh of relief. Along with insurers, thousands of hospitals and physicians practices would have suffered if millions of patients suddenly became uninsured. Now, though, the rest of health reform and all its hard, controversial work continues.
"With the certainty provided by the Supreme Court's decision, now is the time to focus on what matters most to consumers--ensuring access to affordable coverage and high-quality healthcare," said America's Health Insurance Plans interim CEO Dan Durham.
A predictable exchange model
However the rest of the Affordable Care Act and other health reform efforts evolve, the Supreme Court's decision offers a path forward for the individual insurance market--what Aetna hopes to be "modestly profitable" going forward.
The uncertainty over Healthcare.gov only added to the chaos for health plans over the last few years. Now, after learning exchange models and forecasting the initial utilization needs of new members, they can focus on optimizing individual plans with cost-comparison and provider-choice tools and value-based benefit designs, said Ashraf Shehata, a partner in KPMG's healthcare center of excellence.
Considering their poor performance and high costs, some state exchanges are probably now going to wind down and default to the federal marketplace, which was the original idea in the House versions of the ACA. That may actually work well for insurers, regulators and consumers.
"The law of large numbers make sense," Shehata said. "Rather than 50 exchange, the idea of a larger exchange can leverage and synthesize the economies of scale." Instead of dozens of plan-exchange interfaces and related administration, selling exchange plans can be simpler for insurers and possibly less expensive, reducing the need for premium surcharges that the state exchanges as well as Healthcare.gov have had to rely on. Insurers, Shehata said, can "offer more functionality for members if they have a predictable model," so they can finally tackle issues in retail health insurance like cost-comparison of common treatments and medicines.
At the same time, some states, like California, will try to pioneer their own work and pursue a more aggressive consumer-advocacy agenda. Covered California is negotiating on behalf of consumers to lower premiums, capping co-pays for medicines and using data analytics to help insurers more accurately price risk and follow through on quality commitments. And state-specific regulation of individual and small business health plans will also continue.
One big problem still lingers in the quest for universal coverage, though. An estimated four million Americans in Texas, Florida and elsewhere remain uninsured because their state has not expanded Medicaid eligibility.
The outcomes in those states will partly depend on politics and conservative state leaders, but there are signs that even Republican Governors can meet the federal government half-way and craft market-based programs through waivers, said Shehata.
"Many states are willing to look at waivers for Medicaid expansion," for risk-based programs with community and behavioral health features that transcend hospital coverage and could help save money. "The collaboration between these states and the private insurance market is starting to take off," he said, noting programs starting in Indiana and Michigan.