The ruling could weaken lawmakers' efforts to block ACA
provisions by zeroing out the funding.
The U.S. Supreme
Court’s new Affordable Court Act ruling could add some stability to the
individual and family major medical insurance market, at a time the COVID-19 is
shaking everything up.
The court ruled, in a 8-1 decision released
today, that Congress can’t cancel what looks like an agreement to pay insurers
for participating in a program by simply zeroing out funding for the payments.
The court came to that conclusion in
connection with Maine Community Health Options v. United States (Case Number
18-1023). The case involved one of the five major subsidy programs the federal
government used to start the Affordable Care Act (ACA) public exchange program.
Resources
·
An
article about oral arguments in the Supreme Court’s ACA cost-sharing reduction
subsidy case is available here.
The Maine Community Health Options ruling
could end up affecting the fate of two of the ACA subsidy programs, and the
survival of all of the ACA.
ACA Primer
Members of Congress created the main part of
the Affordable Care Act statutory package, the Patiet Protection and Affordable
Care Act, in 2008 and 2009, when Democrats had a solid majority in both
the House and the Senate, and Barack Obama was president.
Traditionally, health insurers in most states
had kept health insurance claim costs manageable by rejecting applicants who
already had serious health problems. Health insurers charged higher when they
did accept applicants who had conditions such as asthma, diabetes or obesity.
The ACA drafters took away most of health
insurers’ traditional defenses. They prohibited use of information about
people’s health problems in insurers’ major medical coverage sales and pricing
decisions.
To compensate health insurers for at least
part of that loss, the ACA drafters set up the ACA public exchange program. The
ACA public exchange program was supposed to set up a web-based health insurance
supermarket in each state, to help consumers shop for health coverage, and to
use subsidies to buy the coverage.
Drafters also included an individual mandate
provision. The provision required many people to have what the government
classified as a minimum level of health coverage or else pay a penalty.
ACA drafters hoped to push and pull many
young, healthy people to pay at least something for coverage, even when they
felt great.
The idea was to protect young, healthy people
against unexpected catastrophes, and to reduce the average level of risk in the
insured population, to help make up for all of the people with diabetes, cancer
and heart disease that insurers would suddenly have to cover.
The ACA Subsidy
Programs
The ACA drafters created two temporary subsidy
programs and one permanent subsidy program aimed at health insurers.
One temporary program, the ACA reinsurance
program, was supposed to use a broad-based fee imposed on most types of health
plans and coverage issuers to help pay the medical bills of people with
individual coverage who ended up having catastrophic claim costs in 2014, 2015
or 2016.
A second temporary program, the ACA risk
corridors program, was supposed to use cash from thriving ACA plan issuers to
help issuers that had problems on the exchange in 2014, 2015 or 2016.
A third program, the ACA risk-adjustment
program, is supposed to use a national patient risk scoring system to measure
the riskiness of each carrier’s enrollees. Carriers with enrollees with low
risk scores are supposed to send cash to the plans with the enrollees with high
risk scores.
The ACA drafters also created two big subsidy
programs that were focused on the individual enrollees.
One was the ACA premium tax credit subsidy,
and the other was the ACA cost-sharing reduction subsidy.
The ACA premium tax credit subsidy helps
people with income from about 100% of the federal poverty level to 400% of the
federal poverty level pay their premiums.
The ACA cost-sharing reduction subsidy is
supposed to provide extra subsidy money for premium tax credit users with
income under 250% of the federal poverty level, to help them pay health
coverage deductibles, co-payments and coinsurance amounts.
ACA Risk Program
Performance
In practice, ACA reinsurance program was
popular and ended up working reasonably well. Some states have replaced the
temporary program with their own state reinsurance programs.
The ACA risk-adjustment program is still in
place but has frustrated the insurers that have been told to pay money into the
system. Some insurers say the risk-adjustment formula is unfair to insurers
with low premiums.
The ACA risk corridors was an immediate flop:
Too few ACA exchange plan issuers did well in the first three years of exchange
operation to pay more than a small fraction of the amounts owed to the thriving
issuers. Opponents of the ACA in Congress succeeded at adding provisions to
must-pass budget bills that blocked the federal government from using any money
other than payments from the thriving issuers to help the struggling issuers.
Some small health insurers went out of business at least partly because of the
failure of the risk corridors program to make the expected payments.
Health insurers say the risk corridors program
managers now owe them about $12 billion.
On the individual subsidy program side, the
ACA premium tax credit subsidy program was designed to draw on general federal
revenue and has been stable.
Critics of the ACA cost-sharing reduction
subsidy program say it should be funded with an ordinary congressional
appropriation, rather than drawing on the same pool of money that the premium
tax credit subsidy was supposed to use money appropriated by Congress. Congress
has refused to appropriate the money.
The U.S. Court of Federal Claims has ordered
the federal government to make $1.6 billion in cost-sharing reduction subsidy
payments to health insurers for coverage provided in 2017 and 2018. The Centers
for Medicare and Medicare Services is still deciding how much cost-sharing
reduction subsidy money might be at stake for 2019.
Maine Community Health
Options Ruling Implications
One immediate effect of the new ruling is that
it could make the ACA individual major medical market more appealing to health
insurers, by raising the possibility that health insurers in the market could
split a $12 billion pot of recovery cash, and at least reducing the possibility
that the federal government will suddenly yank other promised payments away.
Matt Eyles, president of America’s Health
Insurance Plans, said in a statement about the ruling that millions of
Americans rely on the individual and small group markets for their coverage and
care.
“They deserve a steady market that provides
them with affordable choices,” Eyles said. “Health insurance providers are
focused on delivering for them, and they depend on the federal government to be
a fair and reliable business partner committed to the same goal.”
The ruling could also affect other ACA cases
that are still working their way through the courts.
Justice Sonia Sotomayor writes in the new
ruling, for seven other justices, that Congress can’t cancel an agreement to
pay someone by refusing to provide the funding for the payment.
Sotomayor writes:
As we have
explained, “ ‘[a]n appropriation per se merely imposes limitations upon the
Government’s own agents,’” but “‘its insufficiency does not pay the
Government’s debts, nor cancel its obligations.’”
This point could affect other cases that hinge
on efforts by Congress to block programs by setting appropriations for the
programs at zero.
Members of Congress have used the “zeroing
out” strategy because some spending and appropriations bills can get through
the Senate with just 51 votes.
Other bills, such as bills that change federal
policies, usually need at least 60 votes to come up for a vote on the Senate
floor.
That means zeroing out the funding for a
program is usually easier than changing or canceling the program.
Here are the three streams of ACA litigation
that could be affected by the debate about what exactly Congress can zero out:
1. The ACA
Cost-Sharing Reduction Subsidy Program Fight
ACA opponents in Congress have tried to block
the operation of the cost-sharing reduction subsidy program by refusing to
let Congress appropriate the money to operate it.
That means a federal appeals court, or even
the Supreme Court, could revisit the Sotomayor opinion the next time a
cost-sharing reduction subsidy case comes up.
2. The ACA
Risk-Adjustment Program Subsidy Program Fight
Some health insurers say the federal
government should lubricate the ACA risk-adjustment program by adding federal subsidy
money, the way it uses already subsidy money to lubricate the Medicare
Advantage risk-adjustment program, rather than making the ACA subsidy program
be entirely self-sustaining.
The arguments health insurers have made about
the federal government’s responsibility for funding the risk-adjustment
program have been similar to the arguments made about the risk corridors
program.
Health insurers could point to the Sotomayor
opinion when arguing ACA risk-adjustment program cases in court. They may say
the United States still has an obligation to make the payments described in the
ACA cost-sharing reduction subsidy program provisions, even though te funding
for the program has gone away.
3. The ACA
Constitutionality Fight
In 2017, Congress has passed a budget package
that included a provision that zeroed out the ACA individual mandate penalty.
The ACA still requires many people to have a minimum level of health coverage
or pay a penalty, but the penalty owed is now zero.
In 2012, the U.S. Supreme Court ruled that ACA
opponents could not oppose the ACA individual mandate because the mandate
penalty was a tax, and a federal law, the Anti-Injunction Act of 1867,
prohibits plaintiffs from suing to block federal taxes.
ACA opponents now argue, in the case that was
originally known as Texas v. USA, and is now known as California v. Texas, that, because the ACA individual
mandate provision is no longer a tax provision, plaintiffs can now challenge
the constitutionality of the provision in federal court.
The ACA coverage ownership provision is now an
unconstitutional requirement for people to own a commercial insurance product,
the ACA contains no provision saving the rest of the statutory package if one
part is found to be unconstitutional, and that means all of the ACA is now
unconstitutional, ACA opponents contend.
Because ACA opponents relied on zeroing out of
the individual mandate penalty to block the individual mandate, rather
than repealing or changing the language of the penalty provision, the Supreme
Court could end up debating whether simply zeroing out the mandate
penalty amount changed the nature of the penalty provision.
Allison Bell, ThinkAdvisor's insurance editor,
previously was LifeHealthPro's health insurance editor. She has a bachelor's
degree in economics from Washington University in St. Louis and a master's
degree in journalism from the Medill School of Journalism at Northwestern
University. She can be reached at abell@alm.com or on Twitter at
@Think_Allison.
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