Established by the state—What could that mean for the Affordable Care Act?

US Supreme Court

UPDATE: After the Supreme Court’s ruling on June 25, 2015, to uphold subsidies to help people purchase health insurance on federal exchanges, Dr. Huang shared a few new thoughts about the future of the Affordable Care Act.

Elbert Huang, MD, MPH, is one of the few people who understand the nuances of the Affordable Care Act (ACA). He was a senior advisor in the office of the Assistant Secretary for Planning and Evaluation in the U.S. Department of Health and Human Services (HHS) when the ACA was in the early years of implementation. By the time he arrived at HHS, the ACA was already law and the time for proof reading and revision of the law had already passed.

“Most people know a little about the ACA, that it helped people who are uninsured get insurance,” he explained. “They may also know something about Medicaid expansion, and they know there were computer problems at the start. That’s where their understanding stops.”

So ScienceLife asked Huang, an associate professor of medicine and Director of the Center for Translational and Policy Research of Chronic Diseases at the University of Chicago, about King-vs-Burwell, a legal dispute with potentially profound consequences. The case will soon to be heard by the Supreme Court.

The core issue is: “Whether the Internal Revenue Service may permissibly promulgate regulations to extend tax-credit subsidies to coverage purchased through exchanges established by the federal government under Section 1321 of the Patient Protection and Affordable Care Act.”

The argument against the ACA is based on four words, “established by the state,” embedded in the 900 page act. No one knows who wrote them or why. But there they are, they got noticed years after the contentious Supreme Court battle over the law, and they have managed to bring the whole system, which seemed to be working OK, back into jeopardy. The court’s decision could affect an estimated six to eight million people now receiving subsidies. It could disrupt a health care industry that accounts for 17 percent of the nation’s gross domestic product.

Needless to say—but here it is anyway—this is a political as well as a legal issue. A New York Times article summed it up this way: “The plaintiffs say the law allows subsidies only where marketplaces have been ‘established by the state,’ a distinction that those who drafted the law say they did not intend to make … The Obama administration contends that the ‘text, structure and history’ of the Affordable Care Act all support its position.”

Elbert Huang, MD, MPH

Elbert Huang, MD, MPH

SLB: Dr. Huang, what is the King vs. Burwell case about?

Huang: During the drafting of the Affordable Care Act, language in the law stated that individuals may receive financial assistance or subsidies in purchasing health insurance from the insurance exchanges. The law actually says that the subsidies are available for state-run insurance exchanges but does not specifically say that subsidies are available for federal or federal-state partnership exchanges.

Because of the language of the law, the applicants are arguing that subsidies are not supposed to be available for individuals in states with federal or federal-state run exchanges.

The lawyers for the administration argue that the spirit of the law was to provide subsidies throughout the country and that this issue is something that could be resolved by Congress.

Who is King? Who is Burwell?

David King, the lead plaintiff, is a 64-year-old Vietnam veteran and limo driver making an estimated $39,000 a year who didn’t want to buy health insurance, even with a subsidy. He and three others filed a lawsuit arguing that subsidies were only for people purchasing health care on exchanges “established by the State.” Lower courts ruled against them, but in July 2014 the Supreme Court justices agreed to hear the case. The idea came from a South Carolina lawyer who first noticed the “Established” phrase and mentioned it at a conference run by the American Enterprise Institute. Sylvia Mathews Burwell is the 22nd Secretary of Health & Human Services.

How many states and people could be affected if King wins?

There are 34 states that have federal marketplaces. About 6.4 million people are at risk for losing their subsidies. In the state of Illinois, we have a federal-state marketplace. That puts 232,371 people at risk for losing their subsidies.

In addition to the people with health insurance, this also has an impact on the private health insurance plans that have enrolled these individuals and the health care providers who may have started to see the recently enrolled.

What are the dollar amounts we are talking about?

The average monthly tax subsidy is $272. In the state of Illinois the monthly tax subsidy is $211.

Without the tax subsidy, the national insurance premium would increase 287 percent. With the subsidy a person pays $145 a month. Without the subsidy they would pay $417.

What are the public health consequences of people not having a subsidy for health insurance?

When people cannot afford health insurance, they are less likely to see a doctor and consequently, they are less likely to receive preventive care and appropriate chronic disease management of diseases like diabetes, hypertension, and asthma.

The people affected by this case are young adults and middle-aged adults. It turns out that the peak incidence of new chronic diseases occurs in people in their 40s to early 60s. That’s the optimal time those diagnosed with a chronic disease to get on top of their health and health care. That can help people with controllable illnesses avoid many long-term complications, which often appear when they enter their 60s and 70s.

On top of all of this, this group of individuals is working, sometimes independently or in small businesses. They are taking care of children and older parents. They are already stressed out. Not having health insurance makes this situation more stressful, increasing the chances that they will develop common chronic diseases and eventual complications.

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