To Save or Not to Save Obamacare? States Split as King v. Burwell Kicks Off

States can help keep health insurance affordable even if the U.S. Supreme Court rules against Obamacare subsidies. But only some are willing.
by | March 4, 2015

With the U.S. Supreme Court set to hear arguments Wednesday in a case that could dismantle President Obama’s health law, states remain divided over how to prepare for the fallout.

In some states, proponents of the health law are evaluating whether their governors could act without their legislatures. Within state legislatures, bills designed to maintain insurance coverage for residents and bills aimed at preventing a backup plan are competing for attention. Some state legislatures are considering both at once.

The case, King v. Burwell, challenges the wording of the Affordable Care Act. Opponents of the law argue the wording of a passage in the law restricts federal subsidies that make coverage affordable for most enrollees to the 16 states that operate their own online marketplaces.

The Obama administration, Democratic attorneys general and many major health-care companies argue that reading contradicts the framework and intentions of a law designed to expand insurance coverage to millions of people. They’re also citing legal precedents that give deference to executive branch agencies to interpret acts of Congress and prevent the federal government from placing conditions on funding without making those rules clear.

About 87 percent of the 11.4 million people covered through the federal exchange receive federal subsidies that greatly offset the costs of their insurance, according to the Department of Health and Human Services. A recent analysis from the nonpartisan consulting firm Avalere Health found premiums would rise three times on average without the subsidies. In addition, the requirement that individuals purchase insurance and many businesses provide it for employees would effectively cease to exist in more than 30 states.

Legislators in Florida, Indiana, Maine, Missouri, New Hampshire, New Jersey, Pennsylvania, Tennessee, Texas and Virginia have filed bills allowing for the creation of some form of a state-based exchange in recent months, according to the National Conference of State Legislatures and a Governing analysis. All but one have been sponsored by Democrats, and none have advanced.

Missouri, Tennessee and Virginia also have bills from Republican lawmakers that would prevent their states from creating a state-based exchange or taking part in federal subsidies. Five other states with Republican legislatures have similar bills.

Tennessee will take up a bill after oral arguments that would prevent the state from creating a state-based exchange. Its sponsor, Sen. Brian Kelsey, opposes the health law and argues a ruling against the Obama administration would spare individuals and businesses from onerous mandates. As written, it would prevent the state from creating its own exchange, but he said he also welcomes amendments and a full debate on the state’s options.

“This bill could be amended simply to insure the legislature has a full and fair discussion of health exchanges before they’re created,” he said.

Missouri also has a bill that would strengthen a 2012 ballot measure forbidding an exchange by attempting to further restrict federal subsidies. Rep. Margot McNeil, a Democrat, is offering an alternative that isn’t scheduled for debate. Hers would allow the state to create an exchange if the Supreme Court strikes down the subsidies.

“We do have that tension going on in this legislature,” she said.

But some states are exploring just how much support they really need from their legislatures. Rules from the Centers for Medicare & Medicaid Services say a state needs to take action, “by legislation or other means,” and some states, including Kentucky and New York, have established exchange by executive order.

In Pennsylvania, which now has a Democratic governor but a Republican legislature, legislative staffers are considering that option while trying to bring a bill up for a vote in the House Insurance Committee.

“Our understanding is governors have been doing this by executive order,” said Alan Cohn, who directs that committee on the Democratic side. “In a Republican majority, it’d be difficult for me to say whether they plan to [bring our bill up for a vote] because we have not heard of them making plans to do so.”

But others suspect it’s not possible to cut the legislature out. Gov. Tom Wolf  "could, from our understanding, have the executive authority to move forward with a state-based exchange,” said Antoinette Kraus, who directs the advocacy group Pennsylvania Health Access Network. “However, it would have to go through our budget process, which would include the legislature.”

An advocacy group with a similar focus in Indiana also argues Republican Gov. Mike Pence could act alone, but a spokeswoman said by email that Pence opposes a state-based exchange.

In Virginia, Gov. Terry McAuliffe, a Democrat, is “exploring all available options” he can take, a spokeswoman said, but he’s hopeful the Republican legislature will help him find a solution. So far, though, they’ve voted down efforts from a Republican legislator to enact a state exchange.

“We could very well wind up in a special session deciding how we’re going to find some modicum of health care for up to 400,000 people,” said state Sen. John Watkins, a Republican who has proposed creating a state-based exchange.

States that already set up their own exchanges had the help of hundreds of millions of dollars in federal grants. States that are now considering setting up exchanges won’t, which could mean having to find money for staffing and other functions. State exchanges are responsible for regulating health plans, consumer outreach, maintaining a website and handling enrollment. But several states, including Oregon, Nevada and New Mexico, are considered state-based exchanges despite using the federal Healthcare.Gov for enrollment and determining eligibility.

That’s led some health experts to argue the states that already do handle plan management and other functions could become state-based exchange without the more costly technological aspects of running an exchange, though it would still take time, potentially millions of dollars and political will. New Hampshire is one of seven states, called State-Partnership Marketplaces, that are closer to a state-based exchange than others using Healthcare.Gov. A Democratic lawmaker there is pushing a bill that would allow New Hampshire to make the transition.

In Florida, which boasted the highest enrollment of any state at 1.6 million, lawmakers would have a more difficult task to create a state-based exchange. Even the Democratic sponsor of a bill there doubts his legislation will pass, but he holds out hope he could attach it to another bill. That might not happen in a regular legislative session, which could be over before the Supreme Court hands down its decision in June, placing Florida -- and many other states -- in a situation where it would have to call back legislators for a special session.

“I think somebody is going to propose it, but I don’t know -- given personalities in the House -- [if]  it’ll get out of committee,” said Jay Wolfson, a health law professor at the University of South Florida. “There may have to be a special session called. And in fact, unless there’s an explicit effort to get something out of the committee, the house will wait until after the decision.”