Commentary: On Thursday the Supreme Court decided that financial assistance can be offered on both the 17 state-run and Washington, D.C.-run exchanges and the 34 federally run health care exchanges. However, the battle over financial assistance on the public exchanges continues. The next case to watch, launched by Speaker Boehner last November, could once again put public exchange assistance in jeopardy. United States House of Representatives v. Burwell centers around two main issues:
1. Is the administration illegally funding cost-sharing reductions for certain qualified low-income individuals; and
2. Did the administration have the authority to delay the enforcement of the employer mandate?
The second claim, that the administration did not have authority to delay the employer mandate, will have little impact on the Affordable Care Acts future since the employer mandate will be fully phased in by January 1, 2016. However, the claim that cost-sharing reductions are illegally funded would have a major impact on the health insurance market.
The ACA provides two different types of financial assistance for qualified individuals who are enrolled on a public exchange. The first type of assistance is made up of refundable tax credits that help individuals pay for their health insurance premiums. These are found under section 1401 of the ACA, and were what stood to be eliminated in King v. Burwell. Approximately 8.7 million individuals are receiving these refundable tax credits.
The second type of assistance, found in section 1402 of the ACA, is a cost-sharing reduction program, which provides reduced deductibles, copays, and coinsurance levels to qualified individuals enrolled on the public exchanges. Of the approximately 6.2 million Americans receiving the refundable tax credits to help them pay for their premiums, 53% are also eligible for the cost-sharing reductions.
House v. Burwell questions why the government is reimbursing health insurance companies for providing the cost-sharing reduction. The lawsuit argues that the tax credits to help individuals pay for their health insurance premiums were fully funded through an appropriation by Congress, but that the cost-sharing reductions were not. In other words, the health insurance companies should be paying for the cost reductions and the funds the government is using to reimburse the insurance companies are not appropriated and are therefore unconstitutional.
It is an interesting case. The cost-sharing reductions are not being challenged the argument is over whether the government or the insurance companies should pay for them. The dollars at stake are significant. According to the suit, over $3 billion has been paid to the insurance companies to cover these cost reductions, and if continued, another $175 billion will be paid over the next 10 years.1 The case is in its early stages at the District Court level, but because of its high-profile nature, it is certainly one to watch.
Clearly health insurers prefer how the system works today receiving reimbursement for the cost-sharing reductions they provide. Would the end of these reimbursements affect the number of health insurers that participate on the public exchanges? Would the end of these reimbursements affect health insurance premiums and other costs that impact the consumer? Only time will tell.
James Slotnick, J.D., is AVP of broker education at Sun Life.
1 Case 1:14-cv-01967 Filed 11/21/2014 In the United States District Court for the District of Columbia: United States House of Representatives, Plaintiff, v. Sylvia Matthews Burwell, United States Department of Health and Human Services, Jacob J. Lew, United States Department of the Treasury, Defendants. Pg 3.
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