King v Burwell could leave many states in a health care bind
 

[June 25, 2015]  By Eric Boehm and Grayson Quay | Watchdog.org
 
 If the Supreme Court axes the federal health care exchange in a much-anticipated ruling due this month, it could leave many states scrambling for back-up options.

When the Supreme Court reaches a decision in the King v. Burwell case, which could come any day now, the 34 states that use the federal exchange may be forced to either set up state exchanges or lose their health care subsidies entirely. A ruling for the plaintiffs would put at stake over $1.7 billion per month in subsidies to over 6.3 million people.

Under the Affordable Care Act, individuals can qualify for subsidies to purchase health insurance on marketplaces run by the states or the federal government. But the high court has been asked to quash subsidies flowing through the federal exchange because the text of the ACA indicates, in a strict interpretation favored by the plaintiffs in the case, subsidies may only flow through state-level exchanges.

Though nothing is certain right now, some states are taking steps to prepare for the effective end of the federal exchange. Others, though, are doubling down on their opposition to Obamacare.

Pennsylvania is the leader of the former camp. Earlier this month, it became the first state to obtain conditional approval from the federal government to set up a state exchange if the federal exchange is axed. Under the contingency plan, the state would run a call center and conduct outreach and education efforts while contracting with the federal government to continue to use HealthCare.gov.
 

“We would only move forward with this if there is no other recourse available to us,” Jeff Sheridan, spokesman for Pennsylvania Gov. Tom Wolf, told Watchdog on Tuesday.

If the Supreme Court were to rule that federal subsidies can stay, Pennsylvania would immediately pull the application, Sheridan said. The state would do the same thing if Congress acted to extend federal subsidies or re-write the ACA in the wake of the Burwell decision, he said.

About 350,000 Pennsylvanians stand to lose subsidies.

Delaware, where the subsidies of about 20,000 people are at risk, submitted a contingency plan similar to Pennsylvania’s and received approval. So did Arkansas.

Delaware Secretary of Health and Social Services Rita Landgraf expressed confidence the state’s largely Democratic legislature would approve Democratic Gov. Jack Markell’s plan should it become necessary.

Landgraf described the plan as “a (federally) supported state-based market place” and said the transition would likely be “not that heavy of a lift for us.”

But the state exchanges have proven to be a heavier lift than expected in many places.

The federal exchange became a much-publicized disaster when it first went live in November 2013. After being shut down and rebooted the following spring, it has functioned better.

State-run exchanges continue to run into problems.

Hawaii canned its state exchange earlier this month and joined the federal exchange after spending more than $130 million trying to make the state website work properly.

Oregon, after spending $248 million (some of it on a widely mocked advertising campaign trying to entice hipsters to sign up for health insurance), ended up dumping its Cover Oregon state exchange too.

Even states still clinging to their exchanges have had problems. In Minnesota, the MNSure exchange failed to work for 75 percent of the people who tried to use it during its first year, and state officials running the exchange got huge pay raises even as problems continued.

If the federal exchange goes away, states that have already abandoned their own exchanges will likely have to get them up and running again (or, perhaps, for the first time). States that never set up their own exchanges will have to figure out how to do it, and pay for it.

Sheridan said Pennsylvania plans to rent the platform currently being used by Healthcare.gov, thus avoiding some of the costly aspects of building a state-specific platform. The state would pay for the website the same way the feds are currently paying for theirs: with a fee on insurance companies using the exchange.

The state’s Republican-controlled legislature would still have to approve Wolf’s plan for it to be implemented.

That’s a political challenge many states could face.

States with Republican governors, several of whom campaigned vigorously against the ACA, could find themselves in a difficult situation.

Florida Gov. Rick Scott and Texas Gov. Greg Abbott have the most to lose if the court rules for King, with over 1.3 million people in Florida and over 800,000 in Texas currently receiving federal subsidies. Both governors, however, have refused to expand Medicaid under Obamacare and have voiced strong opposition to the program.

In what seems to be an attempt to preserve conservative principles without alienating voters who receive subsidies, neither governor initially took a strong position on the creation of a state exchange. Scott attempted to pass the buck on King v. Burwell by saying it should be left up to Congress to resolve the matter.

“I think it has to be a federal fix,” Scott told reporters in late May.

The “fix” to which Scott referred would be a simple amendment of the words “established by the state,” which have formed the crux of the lawsuit. U.S. Sen. John Barrasso, R-Wyoming, has made it clear Congress does not plan on passing such a fix without asking for some drastic changes to Obamacare in return.

Whether a Republican-controlled Congress would be willing to make that adjustment to the law will be the next major question if the court rules in favor of King and ditches the federal exchange.

Abbott says Congress shouldn’t even consider taking that step.
 

Earlier this week, in a strongly worded op-ed in the National Review, Abbott pointed out the irony of politicians who “won their offices by campaigning against” the ACA “lining up to rescue Obamacare from itself.” He called on Congress to not pass a one-sentence fix to preserve subsidies and on his fellow governors to not create state exchanges.

“Now is not the time to throw Obamacare a lifeline — it is time to sound its death knell,” Abbott wrote.

Josh Archambault, a senior fellow at the Foundation for Government Accountability, told Watchdog last week the King case is the best opportunity for Congress to seriously change how Obamacare works.

The ruling, when it comes, will have serious ramifications for many parts of the American political machine. It will also, in part, shape the historical legacy of the president whose name is attached to the law.

But the most serious affects will be felt by the people in the 34 states currently relying on the federal exchange’s subsidies to make health care more affordable.

According to a Kaiser Family Foundation poll, 63 percent of Americans think Congress should pass a fix if the court rules for the plaintiffs, and 55 percent of those living in states using the federal exchange favored creating a state exchange to preserve subsidies.