U.S. Supreme Court Issues Key Decision on Affordable Care Act
June 25, 2015 05:06 PM
The U.S. Supreme Court issued a 6-3 decision today in King v. Burwell that upheld the legality of subsidies under the Affordable Care Act (ACA) for individuals who purchase health insurance through a federal exchange. Congress, the White House, and all of America had been anxiously awaiting the ruling over the last several months. The case involved a challenge to an Internal Revenue Service rule permitting health insurance subsidies under the ACA to individuals who acquire health insurance through a state, federal, or joint state-federal health insurance exchange. The central issue was whether the language of the law permits the subsidies to individuals only if they obtain the insurance through a state exchange. Presently, 34 states do not operate a state exchange.
In a 6-3 decision written by Chief Justice Roberts, the Court held that the overall context and structure of the ACA law compelled the conclusion that the tax credit subsidy was available whether through a state or federal exchange. The Court found that Congress intended to improve access to health insurance, not make it more difficult. The Court further concluded that rejecting subsidies through federal exchanges would have had a calamitous result, the opposite of what Congress sought with the law. Chief Justice Roberts was joined by Justices Kennedy, Ginsburg, Breyer, Sotamayer, and Kagan in the majority decision.
Val J. Halamandaris, President and CEO of the National Association for Home Care & Hospice (NAHC), released the following statement on the ruling:
“Today’s ruling is the best possible result we could have reasonably expected. Any other result would have led to wholesale chaos for the health care system with people across the country being denied their benefits. The Court’s ruling essentially amounts to a ceasefire in the repeal effort.
“To be sure there are serious problems with the law that need to be addressed, with a particular focus on long-term care and more emphasis on improving chronic care management. Chronic care amounts to about 93 percent of all Medicare spending. Congress has the time and opportunity to make the necessary changes, including softening the blow of the employer mandate, which will hit many small employers hard. We will continue to urge Congress to change the employer mandate to exempt home care providers, amend the definition of full-time to 40 hours per week, provide subsidies to home care agencies, and provide tax credits to home care clients to cover the increased cost of care triggered by the employer mandate. Congress should also help states provide low-wage home care workers with health insurance through Medicaid.”
The loss of the subsidies would have affected over 6 million individuals across 34 states without a state exchange. For several months, Republican leaders in Congress have grappled with the question of what they would do if the Court ruled that the subsidies were illegal. Many wanted to take no action as the loss of subsidies could lead to the wholesale dismantling of the ACA. Others sought a means to protect the insured individuals for a transitional period of time. In recent days, there have been indications that a consensus was developing among Republicans to tie continued, but temporary, financial support to currently insured individuals while repealing the individual and employer mandates. Congressional Democrats and the Obama Administration had offered no suggestions on what should happen if they lost the case before the Court, arguing that the Court should uphold the legality of the subsidies.
Several states have recently received approval to begin operating a state exchange that relies on the federal healthcare.gov infrastructure. This type of hybrid state exchange would be controlled by the state but operate in a fashion very similar to a federal exchange. With the ruling today, states will not need to institute quick changes in their operation in order to continue the subsidies to their citizens.
While the case does not directly impact home care and hospice, its indirect impact is significant. The loss of subsidies in the 34 states would have led to the effective elimination of the employer mandate in those states as the employer responsibility liabilities for penalties are linked to the subsidies. A “large” employer (50 or more FTEs) is subject to a penalty if the employer does not offer affordable and compliant health insurance to full-time employees if just one of those employees qualifies for and receives a health insurance subsidy.
NAHC surveys since 2013 show that there is a high incidence of home care employers that do not offer a qualified health insurance to full-time workers. The survey findings show that nearly 75% of Medicaid-focused home care providers and 90% of private pay, private duty home care companies are at risk of a penalty. Few state Medicaid programs have considered the problem of underfunded payment rates as insufficient to cover the costs increases related to ACA. With private pay companies, the burden of ACA falls on vulnerable elderly and disabled clients. Many of these home care companies have taken steps to avoid the liability of penalties by limiting the number of full-time employees. Less than a third of Medicare home health agencies and hospices face such a risk.
With the ruling, a significant employer penalty is now all but certain in the absence of a change in law. That change is unlikely to occur during the remainder of the Obama presidency as a veto is virtually guaranteed. Affected home care companies must now turn to alternative measures that include offering a qualified health insurance to full time workers, modifying employment practices to control the number of “full-time” workers, seeking higher Medicaid payment rates to cover the added costs, or other actions that avoid or cope with the cost of insurance or penalty.
You can read the Court’s decision in King v. Burwell here.