Timeline Related to Health Insurance and Exchange Rules: Backdrop to King v. Burwell
Released: 2015-06-19T00:00:00

Background

On March 4, 2015, the Supreme Court heard oral arguments in King v. Burwell . A final decision is expected by the end of June.

The central issue in the case is whether the Affordable Care Act (ACA; P.L. 111-148 , as amended) gave authority to the U.S. Department of the Treasury to make premium tax credits available to eligible individuals in every state (including the District of Columbia) or just the states that chose to establish their own health insurance exchanges (state-based exchanges, or SBEs). While the direction and scope of the Court decision is not known, if the Court decides that tax credits may be made available only in SBEs, such a decision may lead to the loss of tax credits in a majority of states where the federal government established the exchanges (federally facilitated exchanges, or FFEs). Given that several million individuals currently receive tax credits through FFEs, the Court decision could have major implications for individual consumers, exchanges, insurers, and other stakeholders.

Loss of premium tax credits would directly affect the affordability of health insurance for the consumers who no longer have the credits. Some individuals may choose to drop coverage as a consequence or seek more affordable insurance, if available. Others may be motivated to continue to purchase coverage, even without a subsidy, either because the credit amounts they received were minimal or they have serious health care needs. Insurers may decide to change plan offerings or discontinue offering individual health insurance policies in a given state in anticipation of a reduction in overall enrollment. Consumers and insurers that continue to participate in exchanges and the market outside of exchanges may see premiums increase in response to the changes to the insurance risk pool . These consumer and insurer actions may, in turn, motivate Congress, the Administration, and/or states to address perceived adverse effects of the Court decision and address other related issues, such as the tax credit program's interaction with the ACA's other coverage provisions.

Given that a Court decision favoring the plantiffs would directly affect the health insurance options of millions of consumers, which, in turn, may motivate insurers, legislators, and policymakers to act, this report provides the time frame in which decisions concerning exchanges and health insurance more broadly may occur, given current regulations and guidance. To the extent that consumers and others (referred to as stakeholders in this report) may be motivated to respond to the Court decision (and respond to other stakeholder actions), this report provides a timeline that identifies selected 2015 dates related to exchange establishment and operation, legislative calendars, and regulation of the individual health insurance market, among other issues. The report concludes with a table that augments the 2015 timeline by identifying relevant sources of information, such as statutory or regulatory citations related to exchanges. While this information may be useful to set parameters around certain stakeholder actions, this report is not meant as a guide to decisionmaking, nor does it attempt to identify all possible stakeholder responses to the upcoming Court decision.

While CRS does not predict a particular direction of the Court decision, certain underlying assumptions were made to simplify identification of important dates. Those assumptions include no retroactive effect of the decision and no delay for when the decision would go into effect.

As indicated above, the direction and scope of the Court decision is not known. Implications of the decision beyond issues related to private health insurance are outside the scope of this report. Moreover, the Court decision may maintain the status quo. Nonetheless, legislators and policymakers may be interested in addressing other issues related to the credits or the ACA more broadly. The dates and potential stakeholder actions included in this report may still apply under such a scenario.

Stakeholders

The potential for the Court decision to affect a number of different stakeholders reflects the current structure of the private market for health insurance and the interplay among key participants in the overall market. At the most basic level, the health insurance "market" works like any other market: with sellers and buyers of products. In this case, insurers sell health insurance plans for purchase by consumers and employers. The market for health insurance, like other forms of insurance, is regulated primarily at the state level. However, the federal government has expanded its role in the regulation of this industry, most recently with the enactment and continuing implementation of the ACA. The ACA itself contains multiple provisions that impose requirements on most of these stakeholders, create new stakeholders (e.g., exchanges), and link requirements across stakeholders.

The stakeholders are identified below, and their role in or potential to affect the private health insurance market is briefly described. To the extent any of the stakeholders respond to the Court's decision, their motivation and ability to do so is subject to a variety of parameters, including requirements and flexibilities under current law and the actions taken by other stakeholders. For example, if a state wanted to change its exchange type (i.e., from an SBE to an FFE or vice versa), it must follow a set process. The process includes submitting required documents to the Department of Health and Human Services (HHS) by certain dates and, in some cases, enacting a state law indicating that the activity is allowed by the state.

Congress may be motivated to respond to the Court's decision through legislation. Consumers are expected to comply with the terms of their health insurance coverage, such as paying premiums. Changes to the conditions under which the consumer obtains health insurance may result in changes in how and whether consumers obtain coverage. Employers that are considered large are expected to comply with the ACA's employer mandate. The penalty associated with noncompliance is triggered only if an employee receives a premium tax credit. HHS , as the entity primarily responsible for issuing exchange-related regulations and guidance, defines the parameters under which all exchanges operate. For example, HHS is responsible for determining the process by which a state can elect to operate a state-based exchange. Additionally, HHS administers the federally facilitated exchanges. Health i nsurance e xchanges (also referred to as marketplaces), whether state-based or federally facilitated, are expected to operate within the parameters established under the ACA and its implementing regulations, such as adhering to the annual and special open enrollment periods set in regulations. However, the ACA and its implementing regulations give exchanges some discretion over certain operational decisions, particularly with respect to how exchanges interact with insurers. Private h ealth i nsurers offering coverage through exchanges must ensure that the coverage they offer complies with state and federal regulations and all exchange-related requirements, whether set by HHS or the exchange. States , in general, have the authority to regulate their private health insurance markets. Depending on the state, the authority may be more or less under the control of the state legislature. With respect to exchanges, a state that elects to operate an exchange must do so within established exchange parameters. These parameters are included in statute and described in regulations and guidance issued by HHS. The Supreme Court is expected to issue a decision in King v. Burwell by the end of its term in June 2015.

Figure 1 and Table 1 show selected activities currently required to be carried out by one or more of the stakeholders and the time frame in which the activities are expected to occur. These activities are not dependent on the Court decision ; instead, they represent the current status of regulations, guidance, and other time-sensitive rules that stakeholders may consider if and when they decide to respond to the decision.