The Affordable Care Act lives: Supreme Court decision upholds premium subsidies

The Affordable Care Act (ACA) has survived its latest legal challenge.

In a much-anticipated decision, the U.S. Supreme Court ruled in the case of King v. Burwell that tax subsidies for buying healthcare insurance made available through the law apply in all 50 states. The plaintiffs in the case claimed that the law  applied only to states that had established their own healthcare insurance exchanges, and not to those that use the federal healthcare.gov exchange.

Most economists and health policy analysts believe that eliminating the subsidies would have made healthcare insurance unaffordable for most of the seven million people buying insurance through the federal exchange. That, in turn, would have created a “death spiral” in which only sick people would purchase insurance, forcing insurance providers to raise their premiums and making insurance even less affordable.

About 87% of people buying insurance through the healthcare.gov exchange receive subsidies, according to the U.S. Department of Health and Human Services. Subsidies average $272 per month.

Creation of the exchanges, and the availability of subsidies for buying insurance, was among the linchpins of the ACA. They, along with expanded Medicaid eligibility, the individual mandate, and forbidding insurers from using pre-existing conditions when rating customers, were considered key to increasing the number of Americans covered by healthcare insurance.

In 2012 the Supreme Court rejected a broader challenge to the ACA. In that ruling, however, the court also left it up to the states to decide whether to expand Medicaid eligibility. To-date 28 states and the District of Columbia have done so.

Physician organizations praised the Court’s decision. “Millions of Americans now have health security because today’s Supreme Court ruling preserves the federal subsidy for their insurance premiums,” Robert Wergin, president of the American Academy of Family Physicians, said in a written statement. “By ruling that federal exchange insurance plans qualify for premium subsidies, the Court has ensured that middle- and low-income families can afford the insurance that provides access to comprehensive health services.”

Wayne J. Riley, MD, MACP president of the American College of Physicians said, “We are thrilled and gratified by the Court’s ruling, which affirms that the citizens of all 50 states will have the opportunity to access either a state or federal exchange to obtain subsidies to purchase health insurance policies which benefits themselves, their families and loved ones.”

Citing statistics from the Kaiser Family Foundation, Riley said in his statement that “6.4 million people would have been in immediate danger of losing their premium tax credits, and subsidized enrollees would have seen a 287%  average premium increase.

The case hinged on wording in the ACA that said subsidies, in the form of tax credits, would be available “in exchanges established by the State.” The plaintiffs said that meant the subsidies could only apply to insurance purchased through exchanges set up by individual states. They also claimed that the law’s penalties for individuals choosing not to be covered by insurance were unconstitutional.

But Chief Justice Roberts, writing for the majority, noted that other elements of the law, such as guaranteed issue and community rating, applied everywhere, “but those requirements only work when combined with the coverage requirement and tax credits. It thus stands to reason that Congress meant for those provisions to apply in every State as well.”      

“It’s a good day for Americans and their access to health insurance coverage,” said Sara Collins, Ph.D., vice president for health care coverage at The Commonwealth Fund. She added, however, that about 25 million adults remain uninsured, and many of those don’t know of their options for obtaining coverage. “We still have a lot of work to do in educating members of the public,” she said.

The decision is a "big relief" that allows the ACA to go forward, said Joseph E. Scherger, MD, MPH, the vice president for primary care at the Eisenhower Medical Center in Rancho Mirage, California, and a member of the Medical Economics Editorial Advisory Board. While Scherger says he believes health consumers still deal with an "overly complex health insurance structure," preserving the ACA as the court decision did is the road to reform.

"At least many people will not lose their coverage and states without exchanges will stay involved," Scherger said.

COMING SOON: Medical Economics will host a roundtable discussion with experts analyzing what the Supreme Court’s decision means for physicians. Stayed tuned to MedicalEconomics.com for audio and analysis.