Obamacare, as the 2010 Affordable Care Act (ACA) has been dubbed, received a fresh lease on life from the U.S. Supreme Court on Thursday. The court ruling (6-3) allows the continuation of subsidies to more than six million Americans in 34 states that do not have their own health insurance exchanges. The ruling will also prompt many states to move to the federal health insurance market, especially those who have had difficulties in setting up their own exchanges.
“This returns the discussion to where it should be, which is in the legislature,” said Mark V. Pauly, professor of health care management, business economics and public policy. “Congress can obviously change this in the future if it can get a president to sign it, but lawyers and judges shouldn’t be playing a larger role in this.”
Robert J. Town, Wharton professor of health care management, expected more states to transition to the federal exchange. “It’s expensive [for states to set up their own exchanges] and having some scale is important in running it,” he said.
Had the court ruling gone the other way, it would have disrupted the health insurance business, according to Robert I. Field, professor of law and health management and policy at Drexel University. Noting the comments of Supreme Court chief justice John Roberts in the case, he said, “You should read it in favor of maintaining those markets, which was the purpose of the law,” he said. Field is also a lecturer in Wharton’s health care management department.
Pauly, Town and Field discussed the implications of the court ruling on the Knowledge at Wharton show on Wharton Business Radio on SiriusXM channel 111. (Listen to the podcast at the top of this page.)
“Somebody … forgot to do the cut and paste properly in writing the law.”–Mark V. Pauly
Pauly agreed that an unfavorable court ruling would have disrupted the health insurance market. If it were to have taken away the subsidy, insurers would be required to charge everyone the same premium, regardless of their age or health risks, he said. “There was a worry that the low-risks would leave and high-risks would stay and that would cause the premiums to rise for the remaining people in the market.”
Town said he was not surprised by the court ruling. “It was clear that was a drafting error,” he said. “The law wasn’t intended to restrict subsidies on the federal exchange.” The plaintiffs in the case — King v. Burwell — had challenged the ACA, citing a sentence that said subsidies could only be granted to qualified individuals though state exchanges.
Pauly, who had signed on in the case as a “friend of the court” on the Obama administration’s side, agreed that a drafting error was at fault. “Somebody … forgot to do the cut and paste properly in writing the law.” Several Democrats and Republicans involved in writing the law also told The New York Times that the words in question were “inadvertent,” “inartful” or “a drafting error.”
“It is expensive to set up an exchange and the federal subsidies for that have run out.”–Robert I. Field
A Bigger Federal Market
The three experts agreed that more and more states would move over to the federal health insurance market instead of pursuing their own exchanges. “Health care is really a third rail issue and a lot of sensible politicians probably think if there’s going to be blame going around, they would rather have it on the federal government than on themselves,” said Pauly. “Many of them [would] rather put the dirty work on somebody else.”
“It is also expensive to set up an exchange, and the federal subsidies for that have run out so it is economically in the states’ interest to just throw it in the federal government’s lap,” said Field. “It’s ironic that the original intent of the law was that every state would have its own exchange, and now we are moving to the opposite of that — a single federal marketplace.”
Pauly did not buy criticism against the ACA that the federal government should not force people to subsidize others who cannot afford health insurance. “The great majority of people feels some concern for the health of their fellow human beings,” he said, “and are willing to pony up some amount of money through subsidies or contributions.” He described Obamacare as “a well-designed vehicle for targeting help to the people who need help to achieve that goal.”
A Divided Camp
Republicans aren’t about to give up their opposition to the ACA, a stance they have maintained over the five years since the law was passed. However, Town felt “the Republicans are running out of bullets.” He added that the only way Republicans could get “a meaningful change in law” is if they are able to get strong majorities in Congress and elect a Republican president.
“If you put the Republicans in a locker room and have them draft their own law, it would probably look similar….”–Robert J. Town
However, Town did not expect the Republicans to propose a significantly different law. “If you put the Republicans in a locker room and have them draft their own law, it would probably look similar with some important changes, maybe in getting rid of the individual mandate and the employer mandate and maybe some other features,” he said.
However, Republicans are divided in their desire to continue to oppose the ACA, with those in the House of Representatives appearing more eager than their Senate counterparts, according to a New York Times report. The court ruling “did serve to indicate that Republicans were not unanimous,” said Pauly. “Not all of them wanted a scorched-earth policy, to wipe out the whole thing and go back to the status quo ante.”
What Lies Ahead
According to Field, consolidation in the health insurance industry is “potentially a threat,” because it reduces the competition that is needed to hold down prices. Town noted that the federal government is now in “a refinement mode” to improve the functioning of the federal health insurance exchange. Pauly said the debate in the future might be about the most popular plans on the exchanges. “The bronze and silver plans have very substantial out-of-pocket payments,” he said. “People have started to say those could be harmful. The debate may move towards thinking more about the configuration of policies that we want to allow people to have.”