Obamacare has been confusing since day one. So it’s not surprising that conflicting claims and some misinformation are circulating about what the Supreme Court’s decision in King v. Burwell could mean for the several million Americans who may be directly affected.
It’s important to realize that a loss in subsidies does not mean a loss of coverage, as this new Heritage Foundation paper helps to clarify.
The law sets as one of the conditions for getting Obamacare’s health insurance subsidies that the coverage is purchased “through an Exchange established by [a] State.” The Court is being asked to decide if, given that phrase, the Obama administration has authority to also pay those subsidies to people who signed up for coverage through Healthcare.gov—the exchange run by the federal government for the 34 states that did not set up their own exchanges.
However, it is important to note that eligibility for insurance subsidies (which is what’s at stake in King v. Burwell) is not the same as eligibility for insurance coverage. While the Court’s decision might mean some people could no longer get subsidies, they would still be able to get health insurance.
Their continued access to health insurance is guaranteed by protections in federal law, including ones enacted nearly two decades before Obamacare. Those consumer protections also require that they be given the opportunity to pick a different plan, including a less expensive one.
Here’s how the relevant Obamacare regulations work:
Obamacare allows eligible individuals to sign-up for coverage during annual open enrollment periods, such as the one for 2015 that ended in February. It also allows them to get, or change, coverage at other times during the year in certain circumstances, such as if someone gets married, has a baby or moves to another state.
Another special circumstance is if an enrollee becomes ineligible for Obamacare’s insurance subsidies—exactly the situation that could result from the Court’s ruling. If the Supreme Court finds that subsidies cannot be paid to Healthcare.gov enrollees, those individuals would automatically have the right to pick a different plan.
Federal regulations also state that an enrollee must be allowed to choose any other plan—at any coverage level and from any insurer—offered in his state through the exchange.
But what would happen if some insurers responded to the Court’s ruling by dropping out of Healthcare.gov? Speculation about that scenario has been fueled by language the government added to its 2015 contracts with the insurers offering coverage on Healthcare.gov, stating that the government “acknowledges” that insurers “could have cause to terminate” their contracts if the subsidies can no longer be paid.
However, as with any contract, it’s important to check the fine print. In this instance, the contract language also says that termination by an insurer would be “subject to applicable state and federal law.”
That’s where the other set of, pre-Obamacare, consumer protections would kick in—making it unlikely that those insurers will actually discontinue coverage. Here’s how those provisions work.
Under earlier federal law, if an insurer discontinues a plan it must give those enrolled in the plan 90 days (three months) notice and the choice of any other plan that it offers in that state’s individual market. Those options would be in addition to the plans offered by other insurers for that state through Healthcare.gov.
If the insurer offers no other plan in a state’s individual market, then the law bars the insurer for five years from offering individual market coverage in that state. Should an insurer actually exit the market in this way, it must give those enrolled in the plan 180 days (six months) notice, and anyone losing coverage would be allowed to choose replacement coverage from among the other plans offered by the other insurers in that state’s individual market—regardless of whether those plans are offered inside or outside the exchange.
The bottom line? Anyone affected by the Court’s ruling will have options for maintaining coverage or choosing a different plan.
Clarity about this question of access to health insurance will also begin to help in resolving concerns about affordability. Consumer protections allow those who would be affected to choose more affordable plans. Unfortunately, Obamacare’s regulatory burden has made insurance more pricey than it needs to be.
Congress should take this opportunity to begin sweeping away Obamacare’s failed policies. It can start by removing the mandates and regulations that drove up insurance premiums and disrupted coverage in the first place for millions of Americans, including those not getting subsidies.
From there, a new conversation about health care reform can start.