Last week, the US Supreme Court heard arguments in King v. Burwell, the case that challenges an important coverage provision of the Affordable Care Act (ACA). The major issue that the Supreme Court will determine is whether the Internal Revenue Service (IRS) has the authority to make federal tax credits available to individuals who purchase coverage through the federally facilitated Exchanges (FFEs), or what the U.S. Department of Health and Human Services (HHS) refers to as “marketplaces.” If the Supreme Court invalidates the IRS rule, millions of Americans who live in the 34 states that elected not to run their own Exchanges and who are receiving tax credits through the FFEs would lose these subsidies.
Last week, the justices presented key exploratory questions during the arguments: What was the federal statutory model after which the ACA was designed to establish national insurance rules and provide federal assistance to states? Does the ACA tie states’ hands – in either a coercive or cooperative way – to receiving federal assistance only if they establish an insurance Exchange? Is it like Medicaid or the Clean Air Act?
While others struggle with these questions, one thing struck me as I reviewed the Court transcript and read the myriad of articles and opinions covering the case. I would argue – and many have overlooked as time passed – that the precursor to the ACA was the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
In 1996, I was a young staffer working on Capitol Hill with Senators Nancy Kassebaum and Ted Kennedy as they crafted the details of one of the most significant federal laws at that time to create national health insurance market rules. In the final legislation, HIPAA relied on both the states and the federal government to enforce the standards around the availability and portability of health insurance coverage. If a state failed to pass enacting legislation or enforce the HIPAA provisions, the Secretary of HHS was instructed under the law to step in and enforce the provisions. This scenario became known as the “federal fallback rules.” HIPAA amended the Public Health Service Act, the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code to set insurance standards and enforcement procedures for the individual and group markets. As of 2012, at least 9 states and the District of Columbia relied on the federal fallback approach to enforce the HIPAA standards.
Long before I was aware of the King v Burwell case, I thought that HIPAA was the precursor to the ACA. The structure of the laws are similar, they amend the same statutes and there are options provided for states, including the option to pass enacting legislation or “fallback” to the federal government. There is clearly one important difference: in establishing new insurance market rules, and in an effort to expand coverage under the ACA, Congress provided advanced premium assistance tax credits to help individuals purchase Exchange coverage.
In some ways, trying to look back now to surmise Congress’ intent to use coercion or cooperation with states and trying to guess which way the Supreme Court will rule are fruitless exercises for anyone who does not sit on the Supreme Court.
Either way, in my view, the decision by the Supreme Court should be a catalyst for action. If the Court strikes down the availability of tax credits in the FFEs, the structure of the law will remain in place and states will still have the option to move forward or not. If the Supreme Court upholds the credits in the FFEs, many states may interpret that as nearly a final word on the permanence of the law, decide to take the ACA back into their own hands and work toward establishing their own state-based Exchanges.
Some states have begun conversations with their legislatures about moving forward. Others are waiting to see how the Supreme Court rules. Establishing a state-based Exchange may invite budget and political battles in many states. But, there are also opportunities for states that step in now and build Exchanges or coverage models that best suit their needs while applying the lessons others have learned from the past five years of ACA implementation.
With HIPAA on my mind, I always thought the Democratic architects of the ACA intended for states to establish their own Exchanges. I doubt many thought so many states would decline to do that. Many Republicans have expressed the view that states should govern their own insurance markets as they chose to do under HIPAA.
Health care stakeholders need certainty and want to see individuals obtain coverage. The Supreme Court may not only be the final arbiter on the law’s standing, but it may also be the catalyst that moves the debate and the resolution forward. Ultimately, I think the most pressing question is: Will the Supreme Court decision spur states to action?