'; if(pArray.length >= 4) { i=2; } else if(pArray.length >= 3) { i=2; inline = ''; } else if(pArray.length >= 2) { i=1; inline = ''; } else if(pArray.length === 1) { i=0; inline = ''; } $('#librarydrawer_story_container script').each(function() { $(this).remove(); }); $(pArray[pArray.length - 1]).after(subscribeBox); $(pArray[i]).after(inline).after($('#librarydrawer_story_container')); $('#text-story').focus(function() { if ($(this).val() == 'EMAIL ADDRESS') { $(this).css({color: '#000000', backgroundColor: '#ffffff'}); $(this).val(''); } }); $('#text-story').blur(function() { var trim = $(this).val().replace(/[\s]/g, ''); if(trim === '') { $(this).val('EMAIL ADDRESS'); $(this).css({color: '#666666', backgroundColor: '#f8f8f8', border: '#666666 1px solid'}); } }); $('.content-subscribe .btn-submit').click(function() { var val = $('.content-subscribe .text').val(); if(val.search(/[a-z0-9!#$%&'*+\/=?^_`{|}~-]+(?:\.[a-z0-9!#$%&'*+\/=?^_`{|}~-]+)*@(?:[a-z0-9](?:[a-z0-9-]*[a-z0-9])?\.)+[a-z0-9](?:[a-z0-9-]*[a-z0-9])?/gi) === -1) { $('.content-subscribe .text').css('border', '#ff6600 1px solid'); $('.content-subscribe .text').focus(); return false; } return true; }); }); //-->

Beyond King v. Burwell: Payers brace for 'death spiral'

Affordable Care Act case leaves insurers with many questions, no answers

The oral arguments on King v. Burwell have come and gone, leaving the industry--and the rest of the country--to wonder what the Supreme Court will decide come June.

Much was discussed during the 84-minute argument, which FierceHealthPayer attended. We've rounded up key takeaways and industry reactions to sum up the session.

[Related Special Report: King v. Burwell Supreme Court ruling: What you need to know.]

Payers must move forward

Because the back-and-forth throughout the session gave no strong indicator on what the Court will decide, payers may have to play out different scenarios.

"It's really hard to predict what's going to happen," Anne Phelps, head of health regulatory practice at Deloitte, told FierceHealthPayer in a phone call after Wednesday's session. "When it comes to health plans in particular, there are a number of things to consider. If the Court strikes down subsidies, then there is the question of timing."

Phelps mentioned that, because the ruling is set for June, consumers will have been covered for six months of the year. This may incentivize consumers to continue coverage for the remainder of 2015, even if they lose out on tax credits. If this is the case, then payers are in an interesting position: They need to figure out a way to maintain members who want low-cost plans.

"Plans are thinking of overall coverage markets," Phelps said. "For each plan, think about the type of plan and its market share in general. Is it a national carrier? Regional? Is the plan more in the employer or individual markets? The national plans are operating more in states that run their own exchanges. A lot are in scenario planning at the moment--let's plan if subsidies are upheld and if they're not upheld."

What's at stake

Based on the oral arguments alone, "It's difficult for plans to move ahead in their markets," Phelps said. "Insurers are worried about an uneven market. But, there are levers in place that can offset this potential 'death spiral.'"

Case in point: Even if subsidies disappear, the employer mandate would not go away. In 2017, state-based exchanges can open up to large employers. A lot of states see this as an attractive option, Phelps added. It's possible that this could entice states to establish their own exchanges.

Ultimately, the main concern for payers is keeping members, so, they must set premiums carefully going forward. They don't want to lose members, especially considering the growing trend toward consumerization in the industry. Regardless of the outcome, noted Phelps, the King v. Burwell ruling will serve as a catalyst for the entire industry to continue looking ahead.

Payer implications

During the arguments, Justice Sonia Sotomayor reiterated a point Justice Stephen Breyer had made: If subsidies are struck down, "We're going to have the death spiral that this system was created to avoid. Insurers are obligated to make sure that, in their states, they guarantee coverage, and that they base their costs on community ratings."

The recurrence of adverse selection, also known as the "death spiral," may cause premiums to increase by 47 percentFierceHealthPayer previously reported. Provisions in the ACA aim to prevent this from happening. This includes the tax subsidies.

Justice Sotomayor later said, "No one's going to visit the program if there are no subsidies because not enough people will buy the programs to stay in the exchanges."

Solicitor General Donald B. Verrilli Jr., representing the defendant, said "there are states that didn't understand the statute" in the same way the plaintiffs interpreted the law. The plaintiffs' argument relies on the the phrasing of section 1311 in the Affordable Care Act, which reads that federal subsidies are available to residents only "through an exchange established by the State."

Justice Samuel Alito quickly rebutted Verrilli: "It's not too late for a state to establish an exchange if we were to adopt petitioners' interpretation of the statute. So, going forward, there would be no harm."

In light of a possible ruling in favor of the plaintiffs, lawmakers in 12 states have proposed bills to create state-run exchanges. However, establishing an exchange is no easy feat, as it requires a huge investment of both time and resourcesFierceHealthPayer previously reported. States also must consult with stakeholders, grant exemptions from the individual mandate to obtain coverage, operate a program that helps individuals navigate the site and certify qualified health plans.

Heavy emphasis on wording

Michael Carvin, lawyer for the plaintiffs, said in his opening remarks that "this is a straightforward case of statutory construction, where the plain language of the statute dictates the result." 

Carvin brought up a valid point. Reading the phrase as written, it does seem as though subsidies are available only in states that actually and physically set up their own exchanges, and not in ones that relied on Healthcare.gov.

Justice Elena Kagan responded to Carvin's remarks by saying, "The answer to the question really does depend on context, and it depends on an understanding of the law as a whole."

Justice Breyer agreed: "It's not a question of connotation; it is a question of denotation. Meaning, the federal government, the secretary, is establishing a thing for the State. What is the thing? The thing that it is establishing for the State is defined as an exchange established by the state."

Read the phrase as the plaintiffs read it, Justice Sotomayor said, and "We're going to read a statute as intruding on the federal-state relationship, because then states are going to be coerced into establishing their own exchanges."

As FierceHealthPayer reported prior to the oral arguments, the federalism angle could be the saving grace for the defendants: If Congress intended to restrict subsidies to exchanges established by the state, state officials should have been warned, and they were not.

How the Justices stand

After hearing both the plaintiffs and defendants' arguments, it's pretty clear that four Justices--Ruth Bader Ginsburg, Kagan, Breyer and Sotomayor--will vote to uphold the statute. Justices Alito and Antonin Scalia appeared to lean more toward the plaintiffs. Justice Clarence Thomas was, for the most part, mute, but will likely side with the plaintiffs.

Chief Justice John Roberts said very little, so it's difficult to know what ran through his mind. Justice Anthony Kennedy appeared torn. While he somewhat did sympathize with Carvin's argument, he did express concern that the law's design created unintended consequences of coercing the states into doing something that Congress wanted. Justice Kennedy may be the swing vote.

For more:
- read the full transcript (.pdf)

Related Articles:
Supreme Court hears King v. Burwell arguments
States could forestall King v. Burwell outcome, but it won't be easy
Panel: ACA will not disappear should Supreme Court side with King v. Burwell plaintiffs
King v. Burwell: Implications of federalism could save Obama administration's case