King v. Burwell – Is the ACA in Danger?

Introduction

No doubt, in the upcoming 2016 election, the Affordable Care Act (ACA) will be one of the main issues. Due to some recent cases, most notably King v. Burwellparts of the ACA may be struck down. This will result in huge implications to the public as well as parties vying for the presidential seat next fall.

King v. Burwell – Background and Implications

King v. Burwell is a challenge to a key component of the ACA regarding tax credits for individuals. The IRS issued a regulation that federal tax credit is available to all financially eligible Americans, regardless of whether they purchase insurance on a state-run or federally facilitated Exchange.

The plaintiffs in King filed a lawsuit in the United States District Court for the Eastern District of Virginia, challenging the IRS rule on the ground that the ACA authorizes tax credits only for individuals who purchase insurance on state-established Exchanges. Plaintiffs in King v. Burwell argue that the text of the ACA only allows for subsidies on state-run exchanges, and that the regulation as implemented by the IRS providing for subsidies on state-run exchanges as well as federal exchanges exceeded the authority Congress granted to it. The Fourth District and D.C. Circuit ruled in two different ways, and thus the plaintiffs in King filed a cert. petition, which the Supreme Court agreed to hear.

So far, only 14 states have set up their own exchanges. Thus, if the Supreme Court rules in favor of plaintiffs in King v. Burwell, mandates and subsidies will be struck down in 36 other states, since they do not have their own independent exchanges set up. According to the Urban Institute, a decision in favor of King will results in 8.2 million more uninsured people in 34 states. Hence, Congress has been working to come up with an alternative plan.

Paul Ryan, Fred Upton, and John Kline Plan Ahead

 Paul Ryan, Fred Upton, and John Kline proposed what they called an off ramp from the ACA that would allow states to opt out of the law’s central requirements. This proposal lets states opt out of the health law’s individual and employer coverage mandates, and insurance policies would no longer have to meet the minimum coverage standards set by law. It will maintain generous tax credits for the purchase of private insurance policies, including refundable tax credits for those who ear too little to owe income taxes.

Tax Credits and Liberalization of Insurance Markets

The new plan would supposedly keep the same core features, but replace the original with a means-tested tax credit that individuals could use to buy a far broader range of insurance products, or deposit the funds in a health savings account. Ryan further reassured the public by stating that the plan would prohibit insurers from imposing lifetime limits on benefits and protect people with existing conditions.

So far, the plan is silent on the question of whether or not the tax credits would be means-tested or uniform. If the plan were to be uniform, then the Center for Health and Economy estimate that it would cover 6 million fewer people than the ACA. If the plan were as Upton revised, it would be more uniform than the ACA, but not completely. That would cover 3 million fewer people.

 Side Stepping Issues in King v. Burwell – State Flexibility

There is quite a bit of overlap with the ACA and the new proposals, but one of the differences is that the new proposed act allows more state flexibility. It will give states the ability to pursue their own vision of coverage and avoiding federal mandates as they do so. While committee members have been trying to make this sound like a radical change, in reality, Section 1332 of the ACA already provides many waivers to states to pursue the goals of the ACA without the legislation’s individual and employer mandates or the need to set up exchanges.

Arguments Against the “New Plan”

According to Senator Ron Wyden, there are many people who are opposed to the new plans. He claims that it’s just a lethargic rehash of previous unworkable ideas. It raises taxes on the middle class, removes protections for consumers and chips away at key coverage benefits that Americans relies on.

Depending on how the Supreme Court rules shortly, part of the ACA may be struck down, and the current committee’s suggestions may be put permanently in place and to the test. Legal practitioners should acquaint themselves with some features of the newly proposed plan and prepare for the Supreme Court’s decision.

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