Once again, the healthcare industry finds itself on a precipice with the arrival of summer. Similar to the summer of 2012, the industry awaits a Supreme Court ruling that could stand the Affordable Care Act (ACA) on its head. In June 2012, the Supreme Court narrowly ruled that the ACA was constitutional, paving the way for full implementation of the ACA. Since 2014, an estimated 11 million Americans have enrolled in health coverage through public health insurance exchanges.
The current challenge to the ACA turns on four words: “established by the state.” The case is King v. Burwell which questions the legality of allowing federal premium subsidies to be available to individuals signing up for healthcare coverage across the nation. King argues for a narrow interpretation that would limit subsidies only to those individuals who buy health plans through state-operated health insurance exchanges.
At stake are billions of dollars in subsidies that support healthcare coverage for approximately 6.4 million Americans. Defendants argue that an unfavorable ruling will undermine access to health insurance coverage, destabilize the individual marketplace and drive up premiums. Oral arguments were heard in March of this year and a ruling is expected by June 30, 2015.
The consequences
Should the Supreme Court rule that subsidies are legal, the status quo will be preserved. However, the ACA is very divisive and future challenges are a possibility. King v. Burwell is the third Supreme Court challenge of the ACA since its enactment in 2010.
Should the Supreme Court rule that subsidies are illegal, an estimated 6.4 million people would lose $9.3 billion annually in subsidies, according to a recent Urban Institute analysis. As a result, insurance premiums would increase by 35%, making health insurance unaffordable for millions of Americans. The number of uninsured Americans would increase by an estimated 44% to 8.2 million. And hospitals will once again feel the pinch of treating uninsured patients. As hospital operating margins remain under pressure, it should come as no surprise that senior executives at leading hospital systems in the U.S. prefer a ruling that keeps subsidies intact.
If the Supreme Court rules against subsidies, it will be up to Congress and the states to provide a solution to help consumers find affordable healthcare, according to Health and Human Services Secretary Sylvia Burwell. Ms. Burwell recently stated that the White House does not have a contingency plan to deal with the consequences of an adverse ruling.
Most industry experts believe the Supreme Court will rule in favor of preserving the subsidies because despite the clumsy language, the intent of the ACA is to provide affordable healthcare coverage to Americans. Proponents of the ACA would argue that is exactly what has been accomplished to date — healthcare coverage for over 11 million Americans since enrollment began in 2014.
And so on the eve of summer, the healthcare industry holds its collective breath awaiting the outcome of King v. Burwell. Stay tuned!