Supreme Court Ruling Against Obamacare May Force State Action

A Supreme Court ruling this year stopping Obamacare subsidies in three-quarters of the U.S. would place immediate pressure on governors who have kept the health law at arm’s length.

The court will hear arguments Wednesday in a case challenging insurance-premium subsidies in states that didn’t build marketplaces under the Patient Protection and Affordable Care Act. The justices may not issue a decision until late June.

Only 16 states built the online and telephone services called exchanges; the rest use the federal system. As many as 87 percent of Obamacare customers get the subsidies. A ruling that ends them in 34 states would dramatically raise insurance premiums for an estimated 7.5 million Americans.

Congress is riven by dissent over the health law, making it unlikely to come up with a fix. The Obama administration says it can do little.

That leaves governors and legislatures as the most equipped to solve the problem, either by working with the president or with other states. Since many are Republican, they’ll have to weigh the consequences of letting constituents lose health-care coverage or finding a way to keep them insured under a program their party has opposed.

“Immediately, even in the reddest of states, it’s going to be an issue,” said Paul Keckley, managing director of Navigant Consulting Inc.’s Center for Healthcare Research and Policy Analysis.

Two Shortcuts

While governors and legislatures could build their own exchanges, that seems unlikely, given the timing: A court decision in late June would leave little more than three months before consumers begin signing up for 2016 coverage.

Instead, two shortcuts are possible.

The Obama administration could vastly simplify its rules for state-run exchanges. In the most permissive scenario, one that would test the boundaries of the law, states might be allowed to pass legislation or issue an executive order declaring that they have established their own insurance marketplace -- and that the system runs it for them.

The Health and Human Services Department already allows Oregon, Nevada, and New Mexico to use while designating the exchange as “state-based,” because all three passed laws establishing one. New Mexico never built its own marketplace, while the other two states shut down theirs after technical difficulties in 2014.

“HHS has control of that,” said Joel Ario, a former Health and Human Services official who is now a consultant at Manatt Health Solutions in New York. “This case is not going to decide who’s a state exchange and who’s a federal exchange.”

Regional Exchanges?

Another option, one that may be more palatable to Republican leaders, is to join with states that already run their own exchanges. The Affordable Care Act authorized regional exchanges, although none have been formed.

“That’s a very likely scenario,” Dan Schuyler, a senior director at Leavitt Partners, a consulting firm in Salt Lake City, said in a phone interview.

For any state run by Republicans, the greatest hurdle will be politics. In Georgia, for example, almost half a million people likely face premium increases if the court eliminates subsidies. Yet the legislature last year forbade the state from creating its own exchange.

“The governor is aware of the impending Supreme Court decision and its potential effects on Georgians,” Jen Talaber, a spokeswoman for Governor Nathan Deal, a Republican, said in an e-mail. “Georgia law prohibits the creation and operation of a state-run exchange. Given that, the General Assembly would play a major role in any future decision.”

Cindy Zeldin, executive director of Georgians for a Healthy Future, an advocacy group for expanded coverage, said her organization has discussed the issue with legislative leaders but has seen little interest in a solution.

“That could change if large numbers of people start to lose their health insurance,” Zeldin said in a phone interview. “I would expect there would be some discussion then.”

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