ACA - will the Supreme Court strike down the subsidies to Federal Exchanges?

March 05, 2015

There has been much discussion in the news and in the courts about this controversial challenge to the ACA law (known now as the Affordable Care Act). The law states that subsidies will be available through STATE Exchanges. The law further stated that if a state chooses not to set up a state exchange, the Federal government will set one up on their behalf. About 30 or more states let the Federal government set up the Exchange for them, and a handful option to a Partnership Exchange - a joint agreement that the state and federal gov't will work together to initially establish the Exchange. (The State of Illinois has a Partnership arrangement.) There are only about 18 true State-run exchanges.

The challenge here is one of semantics. The law SAYS State Exchanges, but most would agree that the IMPLIED interpretation is that this applies to ALL Exchanges, regardless of how they are set up - state, federal, or partnership. For this reason, I personally do not believe that the Supreme Court will take away subsidies from the millions of people who have obtained these subsidies through a Federally-run exchange. One SC Justice has already shown his hand, so to speak, in discussing how he might rule on this case. Read more: The Kaiser Foundation lists around 7.5 million people as having received tax credits (also referred to as subsidies by some) though a Federal Exchange:

If we want to argue the literal meaning of the law, then we would have to strike down many things already implemented. For example, HHS defined "no pre-existing condition waiting periods for children" as "guaranteed issue". They are not the same. One says if the insurance company agrees to accept an application for child or children, the child will not have to wait to be treated for any Pre-existing condition; they will have immediate coverage. The second phrase (guaranteed to be issued) says I cannot Decline your child for any reason; the insurance company must take all children that apply. This interpretation kicked in 6 months after the law was passed, in Sept of 2010, which was well before the full implementation of "guaranteed issued insurance for adults" on 1/1/14. Remember, before this law was passed, insurance companies could decline people and not sell them health insurance because of pre-existing conditions. Ever company selling Child-only policies pulled their insurance from the market and you couldn't buy a child-only policy anywhere! At the time, this was a big problem and took away an affordable option for people who had costly family group insurance through they employer. Today this is a mute point, but the fact remains that HHS decided to interpret one word in a different way that the insurance industry's meaning of the word. No doubt, HHS would argue that this was the INTENTION of the law, not the actual meaning of the words used.

Stay tuned! We probably won't know the final decision until June or July of 2015.