Since its passage five years ago, the Affordable Care Act (ACA) has been the subject of repeated attacks by opponents of the law. These attempts to thwart the ACA, which was intended to expand affordable health care coverage and reduce costs, persist in spite of the fact that the law appears to be achieving its promised objective in the states, including in Pennsylvania.
Most recently, political adversaries have directed their efforts toward challenging IRS regulations, enacted under the ACA, which provide federal credit tax subsidies for those who purchase health insurance through the health care exchanges. They specifically call into question seven words of the legislation: “through an Exchange established by the State.”
In the pending Supreme Court case, King v. Burwell, ACA dissidents allege that this phrasing indicates Congress’ intent to provide tax credit subsidies to only those individuals who purchase health insurance on state-run exchanges — and, therefore, the subsidies should not be available to individuals in states with federally facilitated marketplaces. This poses a formidable threat to the ACA, because the majority of states opted not to set up their own exchange.
The establishment of exchanges under the ACA
In November 2011, the Pennsylvania Insurance Department released an extensive report suggesting broad support for a state-run exchange. Accordingly, it began to take the lead setting up an exchange in Pennsylvania. However, in December 2012, then Pennsylvania Gov. Tom Corbett notified federal officials that the state would default to a federally facilitated health insurance exchange. Consequently, the federal government assumed full responsibility for running the health insurance exchange in Pennsylvania when the exchanges opened in 2014.
Pennsylvania was among the majority of states what defaulted to a federally facilitated marketplace. In total, only 14 states set up independent health care exchanges under the new law. Depending on the outcome at the Supreme Court, this could mean that the majority of Americans, including many of those in Pennsylvania, would lose premium assistance tax credits to pay for health insurance.
Why the federal tax credits are critical
The federal tax credits are essential to ensuring that the ACA expands access to affordable health insurance because they help subsidize the cost of monthly premiums for individuals and families who purchase coverage through the exchanges. Without the credits, many people would not be able to pay for health insurance. This is particularly true for moderate-income earners who do not have access to coverage through their employer or public health insurance programs like Medicaid.
The credits are also critical to stabilizing monthly premiums for everyone. If more people are insured, then substantial health care expenses are more widely shared. The more costs are shared, the lower the unit cost of health insurance. However, the elimination of the tax credits inevitably would reduce the number of people insured, thereby reducing the allocation of risk and likely increasing premiums across the board.
Additionally, younger and healthier individuals would be the most likely to leave the health insurance market, because they are less likely to require immediate health care services. Consequently, the pool of individuals enrolling would be older and less healthy, and expectedly, more likely to incur substantial health care expenses. This inevitably also would contribute to an increase in monthly premiums.
The elimination of credits would leave many without coverage
Prior to the ACA’s enactment, national estimates indicated that over 41 million individuals were uninsured in 2013. In Pennsylvania alone, nearly one in 10 Pennsylvanians (9.7 percent) did not have health insurance between 2008-2012. Among Pennsylvanians age 18 to 64 years, the figure was 13.4 percent. Notably, Philadelphia County had the second-highest uninsured population with 14.2 percent of residents lacking health insurance during that period.
As the majority of Americans reported, cost posed a significant barrier to purchasing coverage. Unsurprisingly, with respect to Pennsylvanians, those living in low-income households were more likely to be uninsured. However, early evidence indicates that the ACA has made insurance more affordable, thereby expanding coverage significantly. In fact, in 2014 alone, more than 10 million Americans obtained health insurance as a result of the ACA. Significantly, the overwhelming majority of individuals who signed up qualified for financial assistance to help cover the cost of care.
An analysis of the numbers reveals that these calculations hold true for those living in Pennsylvania. As of January of this year, more than 400,000 Pennsylvanians have selected a marketplace plan, and 81 percent of these individuals received financial assistance. As a result, the uninsured rate in Pennsylvania noticeably has decreased.
However, health policy experts have estimated that the elimination of tax credits would result in approximately 329,000 Pennsylvanians being unable to afford their health insurance coverage. A further financial breakdown of the numbers indicates that 414,000 people would lose an average of $2,610 in tax credits and cost-sharing reductions, which amounts to a total of $1.1 billion. A negative outcome in King v. Burwell would have a profoundly detrimental effect on those living in the Commonwealth.
Additional adverse consequences
Aside from these financial repercussions, the elimination of tax credits essentially would cripple the ACA’s promise of ensuring universal health care coverage. Though the elimination of credits would not rescind the law’s individual mandate, which was upheld by the Supreme Court in 2012, it would exempt millions from this important requirement because their net cost of insurance would exceed 8 percent of family income. As per the ACA, if the lowest-priced coverage available, namely the “bronze” plan, exceeds 8 percent of household income, then a person is exempt from the individual mandate to purchase health insurance coverage.
The elimination of tax credits would also place many individuals and families that do not qualify for this exemption at a considerable disadvantage. That is to say that if they do not qualify for the exemption because their cost of coverage falls just below the threshold for the exclusion, they may be faced with the dilemma of purchasing the least comprehensive coverage available or incurring the individual shared responsibility payment. The continued availability of the tax credits would prevent this inauspicious result.
Slim chances for countervailing measures
In the event of an unfavorable outcome in King v. Burwell, states with federally facilitated marketplaces could preserve their tax credits by assuming responsibility for their marketplaces. Nonetheless, this is extremely unlikely given the costs associated with such an undertaking, because the states would be entirely responsible for footing the bill. This is especially true in Pennsylvania. As current Pennsylvania Governor Tom Wolf noted in his executive budget brief in March of this year, Pennsylvania currently faces many economic challenges, including a $2.3 billion budget deficit. In light of this, covering the cost to preserve the tax credits in Pennsylvania would be exceedingly difficult.
Furthermore, the current political climate in most states makes participation unlikely. As a practical matter, it would be difficult for legislators to garner the human and financial resources necessary to establish and operate a state-based marketplace. This too likely would be the case in Pennsylvania. Although Governor Wolf supports the expansion of affordable health care, the Republicans, who currently control the Pennsylvania General Assembly, have attempted to impede the implementation of the ACA more than once by introducing legislation that would overly complicate the execution of ACA reforms. Their attempts at obstruction demonstrate that if the tax credits are eliminated, legislators in Harrisburg are not likely to take action to restore them.
Famous last words
It is a well-settled tenet of statutory interpretation that laws are presumed to be internally consistent. Indeed, just last summer, Justice Scalia, a well-known advocate for the textualist approach taken by the ACA’s adversaries in King v. Burwell, affirmed this principle.
Considering the ACA’s overarching goal of expanding affordable health care coverage, it seems clear that the plaintiffs run afoul of this precept. Their manipulation of the few words in controversy is not only inconsistent with the ACA, which spans over 2,000 pages, but also, directly at odds with regulations issued by the Department of Health and Human Services, which is responsible for overseeing the law’s implementation.
Moreover, the ACA opponents’ attempt to take the terminology at issue out of context conflicts with Congress’s authority to govern for the common good, as prescribed by the Preamble to the U.S. Constitution. To be clear, expanding health care coverage undoubtedly benefits all Americans in terms of health, finances, and overall wellbeing. To that end, hopefully the outcome of King v. Burwell will not result in the disputed language being the famous last words of the ACA given the law’s proven potential to expand health insurance coverage and improve the U.S. health care system overall.
Andrea C. Anastasi is an attorney, writer, and advocate, who currently resides in Philadelphia.