Access to Health Care for Millions in the Balance as US Supreme Court Reviews Federal Subsidies for Insurance
Authors: Lawrence O. Gostin
Journal: JAMA (2015)

When the Supreme Court narrowly upheld the individual health insurancemandate inNational Federation of Independent Business v Sebelius (2012), the future of the Affordable CareAct (ACA) appeared secure.However, the case opened the door to 22 states refusingtoexpandMedicaidcoverageforthe poor—amajor setback for health equity. Inaddition, 19 statesopted for fully federally operatedexchanges (marketplaces to purchase insurance), andanother 15 forahybridsystem,withthefederalgovernment retainingownership.Whenstatesdecidednot to formstate-runexchanges, fewexpertsexpected adverse consequences. But all that could change. OnNovember 7, 2014, theUSSupreme Court agreed to hear King v Burwell, which challengesan InternalRevenueService (IRS) ruling that ACA subsidies could be granted to individuals purchasing insurance in federallyoperatedexchanges. If theCourtwere to render these subsidies unlawful, itwould threaten access to health care for millions and undermine the integrity of the ACA. The ACA is often called a 3-legged stool—removing any leg would make the law unsustainable. First, insurers must offer certain defined “essential benefits” without price discrimination based on health status (limited exceptions are made for age and smoking). The Court had already chipped away at this ACA pillar in Burwell v Hobby Lobby Stores, Inc (2014), holding that the US Department of Health and Human Services (HHS) could not require “closely held” for-profit corporations to provide contraceptive coverage against their religious beliefs. Second, to prevent costs from spiraling out of control if the mix of enrollees included a disproportionate number of sick individuals because healthy people opted out, the ACA requires everyone to have health insurance or pay a fine. Third, because many lower-income Americans could not afford health insurance, the government helps to subsidize the cost. Without subsidies, insurance would remain unaffordable and the individual mandate would be unconscionable. King v Burwell threatens to significantlyunderminethis third leg.Thecasecenters on 5 words of the 900-page law (ACA § 1401): subsidies are available to individuals enrolled under an “Exchange established by the State.” The ACA’s drafters expected states to run their own exchanges, but in realitymosthavedeclined.Undera literal interpretation, the lawwouldapplyonly to individuals enrolled through a state exchange, excluding those residing in the 34 states using a federally established exchange. Notwithstanding this literal interpretation, the InternalRevenueService (IRS) has permitted subsidies (“premium tax credits”) for all exchanges,whether stateor federally operated. The Supreme Court should never have agreed to hear the case because there was no split in the lower courts. The Fourth Circuit upheld the IRS’ rule. Although a DC Circuit panel struck it down, the full DC Circuit vacated that opinion, and with new Obama appointees, it was widely expected they too would uphold the IRS ruling. Although “established by the state” appears clear,when readwithin theACA’s context, itmakes little sense—defying the ACA’s purpose and structure. The law says that if states opt out of state-run exchanges, HHS shall “establish and operate such Exchange” (ACA §1321), suggesting that the federal exchange stand in for the state’s, assuming its function. It iswell establishedthat in the face of statutory ambiguity, the Court should defer to the agency’s interpretation. Thus, the Court’s precedents clearly call for upholding the IRS’ reasonable interpretation. King v Burwell has the potential to severely impede health care access, eviscerating the ACA’s purpose of universal equitable access. About 83% of nationwide insurance enrollees applying through the national exchange are eligible for subsidies, worth an average of $2890 annually. The ACA has helped up to 9.5 million uninsured Americans obtain coverage. Withdrawing subsidies in states with federally established exchanges would make insurance unaffordable for a wide swathe of the population, undoing the gains made in access and equity. Of course, individuals without insurance are not a representative sample of the population, but are more likely to be living in poverty, affected by a chronic disease, or belong to a racial and ethnic minority. Price barriers for thesegroupswouldcreateenormous hardship. Strikingdownsubsidies also couldhave dire consequences for the ACA itself. If insurance becomes unaffordable, an individualmandatetopurchase insurancewould be morally and politically unacceptable. However, removing the individual mandate could quickly overwhelm insurance markets,whichwould face ahigher proportionofsickandat-riskpeople,withtheyoung andhealthychoosingtoforego insuranceuntil theyneeded it. This could lead toa “death spiral” in which premiums become increasingly expensive, leading to ever-fewer healthy people enrolling. The Supreme Court is the branch of government intended to be a politically neutral arbiter. Will the Court uphold Congress’ clear intention and safeguard the public’s health?