Tuesday's split decision in two federal appellate court cases over whether consumers shopping on the federal insurance exchange can receive premium subsidies could have major effects on the healthcare market. But some experts say officials in states that have not established their own state-run exchanges could solve the problem fairly easily if they want to, and that they will face significant political pressure to do so.
A study by the Urban Institute concluded that 7.3 million Americans would lose $36.1 billion in federal subsidies in 2016 if states that defaulted to the federal exchange can't access subsidies. That would have a big impact on the exchange insurance market, both in the number of consumers buying plans and in the health status of the greatly reduced pool of enrollees.
here was widespread healthcare industry surprise and dismay over the 2-1 decision by a three-judge panel of the U.S. Circuit Court of Appeals for the District of Columbia in Halbig v. Burwell that subsidies could only go to qualifying exchange plan enrollees in states that established their own exchanges, disallowing subsidies in up to 36 states served by the federal exchange.
A federal appeals court has ruled the Obama administration cannot subsidize insurance premiums for nearly 7 million Americans, dealing a serious blow to the Affordable Care Act. The ruling sets up an almost-certain appeal to the U.S. Supreme Court.
Two judges with the D.C. Circuit Court of Appeals in Washington ruled Tuesday that the text of the reform law clearly forbids income-tax subsidies to go to low- and middle-income Americans who use one of the 34 federally run insurance exchanges. The tax subsidies have been flowing since the beginning of the year, based on a 2012 interpretation of the law by the IRS.
The actual text of the law says the sliding-scale tax credits are only available for coverage purchased “though an exchange established by the state,” which only 16 states did. IRS officials had claimed the imprecise wording of the law contradicted Congress' overall intent to expand insurance coverage as widely as possible. But that argument did not win the day Tuesday.
“Because we conclude that the ACA unambiguously restricts the section 36B subsidy to insurance purchased on Exchanges 'established by the State,' we reverse the district court and vacate the IRS's regulation,” the two-member majority wrote.
The six-month signup period was plagued by technology problems that initially thwarted consumers' attempts to enroll in coverage. But it closed with a surge of interest that ultimately saw the Obama administration top its goal of 7 million enrollments. The tally has grown to 7.5 million, Sebelius testified during a budget hearing on Capitol Hill just hours before her resignation was reported.
“Maybe this is a good point to make the transition, given that the enrollment for 2014 is just finished,” said Paul Ginsburg, a health policy expert at the Price School of Public Policy at the University of Southern California. “It finished on a high note despite all the problems experienced since the beginning. If a change was going to be made, this seems like a pause to make a change like that.”
Sebelius will be replaced by Sylvia Mathews Burwell, who currently serves as director of the Office of Management and Budget. The change was first reported by the New York Times.
The deadline for purchasing insurance coverage that starts Jan. 1 through the federal online marketplace passed as Christmas Day began. But federal officials signaled some wiggle room for consumers who tried to meet the deadline but were stymied by problems with the website.
Those individuals were instructed to contact the federal call center for further assistance. “We have developed a robust casework process to address individual inquiries, respond to specific situations and help consumers transition to new coverage,” CMS spokeswoman Julie Bataille wrote in a blog post Tuesday. “Consumers will hear directly from their health plan about the date their coverage is effective.”
The announcement was just the latest delay as federal officials seek to get as many people signed up for Jan. 1 coverage as possible given the technical problems that plagued HealthCare.gov in October and November. Originally, the deadline was Dec. 15 for coverage that takes effect at the start of 2014.
Some states that are running their own exchanges have opted for further delays. California announced Tuesday that individuals who had started applications by Dec. 23 would have four additional days to sign up for coverage, although they would need to contact the state's call center to complete their enrollments. In Minnesota, Rhode Island and Massachusetts, individuals will have until the final day of 2013 to select coverage that begins Jan. 1.
Federal officials indicated that they continued to see a surge in enrollments as the deadline for 2014 coverage approached. On Monday, more than 2 million individuals visited HealthCare.gov, according to the CMS. Of those, 129,000 were directed to the website's “queuing system” because of traffic congestion. They were then sent e-mails encouraging them to return to the online marketplace when traffic had ebbed. President Barack Obama said last week that more than 500,000 individuals had enrolled in private health plans through the federal marketplace during December—roughly four times the level of enrollments in October and November combined.
State exchanges also witnessed a late surge in enrollments. The Washington Health Benefit Exchange reported that 10,000 individuals signed up for private health plans on Dec. 23 alone. That's 15% of total enrollments since the exchange opened for business Oct. 1. California announced Monday that it had topped 400,000 enrollees in private plans.
Including enrollment in plans through state marketplaces, Obama said, 1 million Americans had enrolled in exchange plans since open enrollment started Oct. 1. However, the number remains well behind pace to meet the 7 million enrollments projected by the Congressional Budget Office by the close of the March 31 sign-up period.
As President Obama reluctantly granted Americans thrown off their health plans quasi-permission to possibly keep them, he called them "the folks who, over time, I think, are going to find that the marketplaces are better." He means the ObamaCare exchanges that are replacing the private insurance market, adding that "it's important that we don't pretend that somehow that's a place worth going back to."
Easy for him to say. The reason this furor will continue even if the website is fixed is that the public is learning that ObamaCare's insurance costs more in return for worse coverage.
Mr. Obama and his liberal allies call the old plans "substandard," but he doesn't mean from the perspective of the consumers who bought them. He means people were free to choose insurance that wasn't designed to serve his social equity and income redistribution goals. In his view, many people must pay first-class fares for coach seats so others can pay less and receive extra benefits.
Liberals justify these coercive cross-subsidies as necessary to finance coverage for the uninsured and those with pre-existing conditions. But government usually helps the less fortunate honestly by raising taxes to fund programs. In summer 2009, Senate Democrats put out such a bill, and the $1.6 trillion sticker shock led them to hide the transfers by forcing people to buy overpriced products.
This political mugging is especially unfair to the people whose plans on the current individual market are being taken away. The majority of these consumers are self-employed or small-business owners. They're middle class, rarely affluent. They took responsibility for their care without government aid, and unlike people in the job-based system, they paid with after-tax dollars.
Now they're being punished for the crime of not subsidizing ObamaCare, even though the individual market was never as dysfunctional or high cost as liberals claim. In 2012, average U.S. individual premiums were $190, ranging from a low of $123 in North Dakota to a high of $385 in Massachusetts. Average premiums for family plans fell that year by 0.5% to $412.
Those numbers come from the 13,000 different policies from 180 insurers sold on eHealthInsurance.com, the online shopping brokerage that works. (Technological wonders never cease.) Individuals can make the trade-offs between costs and benefits for themselves. This wide variety is proof that humans don't all want or need the same thing. If they did, there would be no need for a market and government could satisfy everybody.
The U.S. Supreme Court has agreed to referee another dispute over President Barack Obama's healthcare law, whether businesses can use religious objections to escape a requirement to cover birth control for employees.
The justices said Tuesday they will take up an issue that has divided the lower courts in the face of roughly 40 lawsuits from for-profit companies asking to be spared from having to cover some or all forms of contraception.
The court will consider two cases. One involves Hobby Lobby, an Oklahoma City-based arts and crafts chain with 13,000 full-time employees. Hobby Lobby won in the lower courts.
The other case is an appeal from Conestoga Wood Specialties Corp., a Pennsylvania company that employs 950 people in making wood cabinets. Lower courts rejected the company's claims.
The court said the cases will be combined for arguments, probably in late March. A decision should come by late June.
The cases center on a provision of the healthcare law that requires most employers that offer health insurance to their workers to provide a range of preventive health benefits, including contraception.
In both instances, the Christian families that own the companies say that insuring some forms of contraception violates their religious beliefs.
The key issue is whether profit-making corporations can assert religious beliefs under the 1993 Religious Freedom Restoration Act or the First Amendment provision guaranteeing Americans the right to believe and worship as they choose. Nearly four years ago, the justices expanded the concept of corporate "personhood," saying in the Citizens United case that corporations have the right to participate in the political process the same way that individuals do.
To ease insurance sign-ups that have been slowed by federal website problems, CMS officials have announced that individuals and families now can enroll for exchange health plans directly through insurers and still qualify for a federal premium subsidy.
Previously, HHS directed everyone seeking exchange plan coverage and a federal premium subsidy—available to individuals and families earning up to 400% of the federal poverty level—to enroll through a state- or federally operated marketplace.
In actuality, HHS finalized rules on direct enrollment by insurers in August. As Tim Jost, a Washington and Lee University law professor and healthcare reform expert describes the process in a Health Affairs blog, the applicant must start at the insurer's website and provide basic information, then transfer to the exchange website where eligibility for premium tax credits is determined. Then the applicant returns to the insurer's website for plan selection.
HHS has announced it will permit direct enrollment in the 36 states served by the federal exchange. But it's up to each state-run exchanges to decide for itself whether to allow it, Jost said. Consumers also can sign up for exchange health plans through insurance agents and brokers who have received exchange training and certification.
Given the ongoing difficulties of the federal website, direct enrollment through insurers could prove to be an important alternative method for allowing large numbers of individuals to sign up for coverage. But it remains to be seen how well federal officials and insurers can make this work.
Some consumer advocates fret that having people sign up directly through insurers undermines one of the advantages of the online marketplaces, since consumers will only see the plan options offered by that particular insurer and won't be able to comparison shop for the plan that best meets their needs in terms of benefits, premium, cost-sharing and provider network.
But the HHS final rule does require insurers to inform all direct-enrollment applicants that other qualified plans are offered by other insurers through the exchange, and to give them an opportunity to view the premiums, benefits and other features of those other plans.
Jost wrote that direct enrollment will facilitate getting as many people enrolled in coverage as quickly as possible. While the direct enrollment portal hasn't been working well up to this point, HHS said it has fixed some of the problems, and insurers are checking to see if they can make it work.
The chaotic rollout of the federal online marketplace, HealthCare.gov, and the low enrollment through the site has been the dominant storyline since it opened for business on Oct. 1. Fewer than 27,000 people in the 36 states served by the federal portal successfully enrolled during the first month of business.
But state-run exchanges operated in 14 states and the District of Columbia generally fared better in getting up and running. About three quarters of enrollees nationwide as of Nov. 2—nearly 80,000—signed up for private plan coverage through those 15 exchanges. That significantly boosted the first month's nationwide enrollment, though the 106,000 figure still amounted to only about one-fifth of what the Obama administration originally projected for October.
On Thursday, Families USA, a group focused on expanding insurance coverage, hosted a call with reporters to emphasize some of these state successes. In New York, for example, as of Nov. 12, nearly 50,000 people had signed up for coverage. Those enrollments were split almost evenly between individuals who qualified for Medicaid plans and those who signed up for a private health plan offered on New York State of Health.
n Connecticut, roughly 14,000 individuals have signed up for coverage through the state's online marketplace. Kevin Counihan, CEO of Access Health CT, said that's roughly double what was anticipated. Those expectations were influenced by Counihan's experience serving as chief marketing officer for Massachusetts' Connector exchange when it launched in 2007. Only 123 individuals enrolled for coverage in the first month that the Massachusetts marketplace was open for business in 2007.
But even in states where the exchanges are functioning relatively well, there is some residual fallout from the problems associated with the federal website. Covered California enrolled roughly 60,000 individuals for coverage in its first six weeks of operations. But Peter Lee, the exchange's executive director, said his marketplace has had to tweak its marketing material to emphasize that the California website is working, because residents aren't necessarily aware that it's separate from the federal marketplace.
The deal is meant to mollify millions of people enraged after their insurers canceled policies that do not meet Obamacare requirements. The uproar has ensnared the White House for weeks, shining a spotlight on Obama's previous promise that people who liked their insurance plans can keep them.
"This fix won't solve every problem for every person" but it will help many, the President said at the White House. "We are going to do everything we can to help Americans who've received these cancellation notices."
But the fix, as reported earlier by CNN's Dana Bash, puts the onus of the renewals on insurers. The administration is not requiring insurers or state insurance commissioners to extend the existing plans, but instead is allowing insurers to offer an additional year of coverage.
Also, insurers must notify policyholders of the difference in benefits between their policies and the Obamacare plans available on the insurance exchanges. And the companies must inform people that additional policies are available on the exchanges and that subsidies may be available to those who qualify.
The launch of the Affordable Care Act has so far been marred by major technological problems with both the federal and state enrollment websites.
Obama admitted the problems in his comments. "We fumbled the roll out on this health care law," he said.
The administration reported Wednesday that fewer than 27,000 Americans selected an insurance plan through the federal healthcare.gov site, which is handling enrollment for 36 states. And the site is still far from fully operational, leaving tech experts racing to get it working by month's end, as the administration promised.
State regulators concerned about impacts
Not long after Obama's speech Thursday, an association of state insurance regulators said it was concerned that the decision could drive premiums higher.
The National Association of Insurance Commissioners, which represents Connecticut Commissioner Thomas Leonardi and 49 others, said the decision would be a detriment to the insurance marketplace.
"This decision continues different rules for different policies and threatens to undermine the new market, and may lead to higher premiums and market disruptions in 2014 and beyond," the NAIC said in a statement.
The group also noted that it remains unclear how the reversal can be practicably implemented, now that cancellation notices have gone out to many and rates have been approved for 2014.
Leonardi released this statement: "The department is carefully examining the full effect that this change would have on all Connecticut policyholders. The ACA is an expansive and complex law built on myriad consumer protections and any change deserves careful and thoughtful analysis."
The insurance industry said it had similar concerns to the commissioner's group.
"If due to these changes fewer younger and healthier people choose to purchase coverage in the exchange, premiums will increase in the marketplace and there will be fewer choices for consumers," Karen Ignagni, president of industry group America's Health Insurance Plans, said in a statement. "Additional steps must be taken to stabilize the marketplace and mitigate the adverse impact on consumers."
Hartford-based Aetna — one of the nation's largest health insurers — told Reuters Thursday that it will need cooperation from state regulators across the country on policies and rates to bring cancelled plans back into existence.
"We support efforts to allow people to keep what they have. However, we will need cooperation and expedited approval from state regulators to remove barriers that would make it difficult to make this change in such a short period of time," Aetna told Reuters.
Seeking to defuse a growing political furor as millions of Americans receive cancellation notices from health insurers, the Obama administration will not require insurance companies to upgrade existing individual plans to meet the requirements of the healthcare reform law this year.
White House officials say it can be done without legislation. President Barack Obama was scheduled to speak about the issue from the White House late Thursday morning.
The announcement comes a day after the administration reported that just 106,000 Americans enrolled in private plans through the law's health insurance exchanges through Nov. 2. A number of Democrats have signaled they would support legislation to address the cancellations and the troubled rollout of the exchanges.
“Essentially this is an extension of the grandfathering principal,” said a senior White House official, speaking to reporters on background.
Insurers that choose to take advantage of the change will have to follow two rules. They'll have to notify consumers what protections required under the Affordable Care Act these renewed plans do not include. They'll also be required to tell consumers that they'll have additional options avail
- Affordable Care Act Glossary of Terms
- Affordable Care Act Resources
- Become an Obamacare Health Care Navigator
- Fixes for States Facing End to Exchange Subsidies
- Appeals Court Strikes Down ACA Insurance Subsidies
- HHS Secretary Kathleen Sebelius Resigns
- More Deadlines Extended as Exchange Enrollments Increase
- Affordable Care Act Raises Prices and Limits Medical Choices