One of the important aspects of the Patient Protection and Affordable Care Act (“PPACA”) is the creation of new health insurance exchanges where individuals can buy regulated healthcare insurance. To encourage states to establish such exchanges and individuals to buy healthcare from these exchanges, Congress chose to offer subsidies in the form of refundable tax credits to help a state’s low and moderate-income residents be able to buy healthcare. Section 1401 of the PPACA states that individuals who purchase healthcare insurance through an exchange established by a state will qualify for the subsidies.
The wording “through an exchange established by the State” is the precise issue in a case to watch, Halbig v. Sebelius. The case, filed in the federal district court in the District of Columbia, involves four taxpayers and three employers (one, Innovare Health Advocates, a Tea Party-backed organization) who are challenging the authority of the IRS to issue subsidies to health-insurance companies and impose penalties on individual taxpayers and employers in the 36 states that have not established a health insurance exchange under PPACA.
Plaintiffs argue that these subsidies and penalties violate the clear and unambiguous language of the Act, which anticipates premium assistance only in states with state-operated exchanges. (Pruitt v. Sebelius also challenges the IRS’ authority and will be in front of the Eastern District of Oklahoma in the near future). Plaintiffs have a strong argument as the exact language of the statute states “through an exchange established by the State.” Should this case proceed to the Supreme Court, the Court will engage in statutory construction to deliver a ruling on this issue. The first step of statutory construction is a plain language analysis in which the Court will assume the legislative purpose is expressed by the ordinary meanings of the words used. See Sec. Indus. Ass’n v. Bd. of Governors. And where the plain language is clear and unambiguous, the Court will usually not inquire further to ascertain meaning. See Qi-Zhuo v. Meissner. Only if the Court finds ambiguity within the statute will it then look to legislative intent to interpret the statute. Here, it seems that the language clearly states that subsidies will only be afforded to those 14 states that have established an exchange, so it will be interesting to see further ruling on the issue.
To the contrary, proponents of the PPACA argue that Plaintiffs’ argument is inappropriate based on other sections of the PPACA, the legislative history, and the overall structure of the Act. First, supporters argue that the availability of tax credits through federally operated exchanges is recognized in other sections of the Act such as 1311, 1321, 1401 (36B of Internal Revenue Code), and 1413. Second, proponents argue that the legislative history suggests that Congress intended for the subsidies to be available in every state. In making such claim, they rely heavily on the Senate Finance Committee Report of 2009, which stated that tax credits would be provided to reduce the cost of purchasing insurance, but with no mention of any limitation based on the nature of the exchange. They also point to the fact that the Congressional Budget Office provided Congress in 2009 with an analysis of the impact of the PPACA on premiums, with the assumption that tax credits would be available in all states. Lastly, they claim that the overall purpose of the PPACA is to bring millions of individuals into insurance markets by providing tax credits, and to rule that tax credits will be inapplicable in over half the country would defeat the purpose of the statute. The proponents’ arguments rest heavily on legislative intent, which as stated above, will only be addressed if ambiguity is found within the statute.
Plaintiffs sought a preliminary inunction to block subsidies immediately for those who buy health insurance through the federally operated exchanges, however, U.S. District Judge Paul Friedman refused to grant the injunction. Nonetheless, Judge Friedman allowed the case to proceed and stated that it would be handled on an expedited basis, giving consumers a clear answer under the law before the March 2014 deadline to buy insurance.
Why, you ask, are the Plaintiffs challenging the IRS subsidies to all exchanges, whether federally or state established? In their complaint, Plaintiffs claim that the subsidies “financially injure and restrict the economic choices of certain individuals.” There is an exemption from the individual mandate for low- and moderate-income individuals for whom healthcare insurance is “unaffordable,” however with the subsidies, such individuals are no longer exempt, and are thereby forced to purchase healthcare under the individual mandate. Following from this, employers are charged a penalty if they do not adhere to the “employer mandate,” which is triggered by their employees receiving a federal subsidy.
Although there is little attention paid to this case right now, more should tune in to see the final result. One of the most important aspects of the PPACA will be inapplicable to over half the country if the Court chooses to rule in favor of the Plaintiffs. One way or another, this will be a case to watch.
According to the website designated for the new health insurance marketplace, www.healthcare.gov, “The Health Insurance Marketplace is Open!” Yet, despite this encouraging message, people are having trouble accessing the website since its launch. According to sources, the website had over 19 million visits in the first ten days, which caused numerous problems for users.
On October 21, 2013, President Obama spoke publicly about the disappointing malfunctioning of the government’s healthcare website. Obama’s speech was apologetic yet optimistic, as he reassured the public that this minor kink in the system would be fixed.
“[L]et me remind everybody that the Affordable Care Act is not just a website,” Obama said. “It’s much more.”
Obama also responded to critics of the healthcare law and rollout of the website, as he reassured the public,
“It’s time for folks to stop rooting for its failure, because hardworking, middle-class families are rooting for its success.”
Despite Obama’s optimistic remarks, reports indicate that the website could take weeks or months to work properly, citing heavy traffic on the website as a roadblock to accessibility. To address this delay, Obama read aloud the phone number listed on the government website—1-800-318-2596—whereby citizens can still apply for healthcare coverage, despite the issues with the government website. Insisting that waiting times for people calling the toll-free number have been minimal—averaging less than one minute—Obama hoped that reading the number on camera would encourage people to make the call.
Meanwhile, the Department of Health and Human Services plans to bring in specialists to help fix the problems with the website. The website has been updated several times since problems arose, and officials hope it will be running seamlessly soon.
Currently, the website includes several features which will become more useful in the coming weeks, including a live chat option, resources in foreign languages, and quick information links for different populations, including states, businesses, and the media.
While the federal healthcare exchange has been experiencing problems, many of the nation’s uninsured have been able to sign up on state-run healthcare exchanges with fewer issues. Still, state-run exchanges relying on federal processes such as identity verification have experienced complications.
To date, at least sixteen states and the District of Columbia have their own state-run exchanges in lieu of the federal exchange, offering a variety of options for consumers to choose from. After consumers start buying insurance on the exchanges, companies will decide whether to increase or decrease their participation in the federal and state healthcare exchanges, as they gauge the interest of various populations.
Though reports have illustrated the healthcare marketplace roll out as slow, since the new program has been implemented and the marketplace has been opened, almost 500,000 people have already applied for healthcare—though it is unknown how many of those 500,000 actually purchased a policy. Moreover, a Pew Research Center poll reported that 22% of America’s uninsured have visited the online exchange since its launch. To increase the number of people signed up in the new program, administration officials will soon be venturing to areas of the country with a significant portion of uninsured individuals, in order to persuade people to sign up for healthcare on the exchanges.
Undeterred by the critiques of the website, Obama stated,
“Our goal has always been to declare that in this country the security of health care is not a privilege for a fortunate few, it’s a right for all to enjoy. That’s what the Affordable Care Act’s all about. That’s its promise. And I intend to deliver on that promise.”
It seems that Obama has made it to the last hurdle. The coming weeks will show whether he can make the jump.
Filed under: Accountable Care Organization, Antitrust, Cost Control, Health Reform, Insurance Companies
Theresa Brown’s op-ed in the New York Times on Sunday, title “Out of Network, Out of Luck,” raised concerns about patients’ access to physicians within a restricted provider network. Brown describes the market in Pittsburgh, where two large hospital systems, each with an allied health plan, are battling for market share, leaving some patients with a painful choice: leave their treating physician, sometimes during a course of care, or pay higher out-of-network fees. Brown notes that the hospital systems’ integration with payers, and their aggressive swallowing up of physician practices, are steps taken in furtherance of the goals of cost containment and quality improvement.
The piece highlights the growing problem of network adequacy in health plans. The Affordable Care Act’s goal is expanded coverage, but it encourages some mechanisms to restrain cost. For example, health insurance exchanges’ lower-than-expected premiums resulted in part from insurance plans’ restrictive provider networks. The business proposition for narrow networks has been clear for decades, as plans can offer providers patient volume in return for price concessions. This dynamic is complicated, as Professor Tim Greaney has described, near-monopsony power of insurers in some states, and hospital system mergers undertaken in reaction to insurer power, but which can also have anti-competitive effect.
As the Pittsburgh situation demonstrates, powerful hospital systems and insurance plans will duke it out for market power, but may also combine in new, hybrid organizations. As the battleground moves from fee-for-service to more sophisticated reimbursement tools such as global payments, the elbows will get sharper, and the competition that remains will likely narrow patient choices even further. Massachusetts, the precursor in so much that is cutting edge in health policy, is showing the way. As Mechanic, Altman, and McDonough described last year, substantial pressure from plan sponsors and government have led provider systems to cooperate in programs that narrow patient choice, in the interest of restraining cost.
Is this a bad thing? Read more
Filed under: Disparities, Health Reform, Medicaid
The Commonwealth Fund (“Commonwealth”) has recently released its first-ever Scorecard, which provides a state-by-state comparison of the health care experiences of the 39 percent of Americans with incomes less than 200 percent of the federal poverty level. The report, titled Health Care in the Two Americas: Findings from the Scorecard on State Health System Performance for Low-Income Populations, finds striking disparities by income within and among states, and many news sources have quickly made these findings known to the public.
The purpose of the study was to identify opportunities for states to improve how their health systems serve their low-income populations and to provide benchmarks of achievement tied to the top-performing states. The report is based on thirty indicators of access, prevention and quality, potentially avoidable hospital use, and health outcomes, but does not analyze the potential effect of the 2010 healthcare law, the Patient Protection and Affordable Care Act (“ACA”). This law was designed, in part, to guarantee healthcare access for all Americans no matter where they live and the study’s lead author and Commonwealth’s senior vice president Cathy Schoen has suggested that “[w]e ought to be able to close the geographic divide … There is potential for a real leap forward.”
More specifically, the study finds that the poor in the highest-ranking states are more likely to be covered by health insurance, to have a regular source of medical care, and to get recommended preventative care. Health system performance for low-income populations in leading states is often better than the national average and better than it is for high-income populations in other states. Several news articles have pointed out that Texas is the state with the largest rate—55 percent—of uninsured low-income adults. Nine of the ten states at the bottom were in the South–other states at the bottom include Alaska, Florida, Georgia, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, Virginia and Wyoming, all of which have refused to expand their Medicaid programs. New Jersey is ranked number 26. It is also among the states that will participate in the Affordable Care Act’s Medicaid expansion.
Significantly, Commonwealth notes that having low income does not have to mean below-average access, quality, or health outcomes. Further, the Scorecard finds much less state-to-state variation in health and health care experiences among people with higher incomes.
As the ACA continues to take effect, the report is optimistic that the Act “represents a historic opportunity for states to provide better health care to economically vulnerable people by providing resources to overcome the geographic and income divide—especially for states with high rates of poverty.” In light of the Senate’s recent 100-0 vote to avert government shutdown, the date on which health care exchanges set up under the Affordable Care Act will go into effect, October 1, looms ahead.
Photo, of a doctor’s office in New Orleans, courtesy of Bart Everson.
TIM JOST INTERVIEWS ANDY KOPPELMAN ABOUT KOPPELMAN’S NEW BOOK, THE TOUGH LUCK CONSTITUTION (Oxford University Press 2013).
Q. (Tim Jost) Your book explains, for the general reader, what was at stake in the health care fight and what the Supreme Court did. Why should the general reader care? All this is old news.
A. (Andy Koppleman) If you’re sitting on a hill, and a large boulder rolls past you, it’s a good idea to look uphill to see if any more boulders are coming. The history matters because it shows that there are real dangers.
Last spring, the Supreme Court came within one vote of taking health insurance away from more than 30 million people. Chief Justice John Roberts declined to join the four judges who wanted to do that, but he embraced all their principles. Those principles are nasty. All five judges think that universal health care would be unconstitutional. All are suspicious of a law that asks the healthy and rich to support medical care for the sick and poor. All of them are still on the Supreme Court. They continue to exercise political power over the rest of us. Americans need to understand what happened.
Q. So what do you tell us that we don’t already know from the news stories?
A. My book explains why Obama decided to include the unpopular provision requiring everyone to have insurance. I also show that the Republicans, who originally proposed that idea, turned against it just because they wanted to deny Obama a victory. Most importantly, I show where they got the idea that the mandate was somehow a violation of an important liberty.
Q. Why did the constitutional case take the form it did?
A. The Republicans’ objection to the Act was a combination of politics and substance. Some of them honestly thought it was bad policy. But you can’t challenge a law in court because you don’t like the policy. You need to make a constitutional objection. The constitutional objection was invented, in sketchy form, just as the bill neared passage and almost instantly became Republican Party orthodoxy. It relied on an extreme libertarian philosophy, which holds that, if you get sick and can’t pay for it, that’s your tough luck. The challengers’ arguments would have struck down the Act even if the alternative was a huge population of uninsured. The dark heart of the case against the ACA is the notion that the law’s trivial burden on individuals was an outrageous invasion of liberty, even when the alternative was a regime in which millions were needlessly denied decent medical care.
Q. What about the legal arguments?
A. These are less complex than many people think. Insurance is part of commerce among the several states. Congress can regulate it. Therefore, Congress can prohibit health insurers from discriminating on the basis of preexisting conditions. Under the Necessary and Proper Clause, it gets to decide what means it may employ to make that regulation effective. I explain how the challengers tried, and failed, to get around this simple argument.
Q. Much of your book deals with the history of these constitutional provisions that formed the basis for the ACA litigation. Why should we care about this history?
There are two reasons. One is that, in interpreting any law, it is helpful to know the reasons why the law was passed. The second is that the framers of the Constitution were very bright people, and their insights are useful in addressing today’s problems.
The Constitution was adopted specifically in order to give Congress power adequate to address the nation’s problems. That is its fundamental and overriding purpose. The health care issue is one that the states had tried and failed to address: only Massachusetts did it, and its circumstances were very unusual. A situation in which neither the states nor the federal government could solve the country’s problems was what we had under the Articles of Confederation. It is precisely what the Constitution was intended to prevent.
Q. What are the boulders that you suggest may still be coming down the hill?
A. The real moral force behind the challenge to the ACA wasn’t any technical legal argument. It was most clearly stated at the oral argument, by Justice Antonin Scalia. The counsel for the United States argued that the state legitimately could compel Americans to purchase health insurance, because the country is obligated to pay for the uninsured when they get sick. Scalia responded: “Well, don’t obligate yourself to that.”
Q. Does Justice Scalia really think that there’s no obligation to care for sick people? Why was he saying this?
A. The answer has to do with the structure of constitutional law. If you want to trash the ACA –- and Scalia did –- you have to assert constitutional limits that would exist even if there were no other way to deliver medical care to everyone.
This is why so many people (including, in the end, a near-majority of the Court) who were not Tough Luck Libertarians at all, who would find that philosophy repellent, nonetheless found themselves saying Tough Luck Libertarian things, and making claims based on a Tough Luck Constitution –- a constitution in which there is no realistic path to universal health care. That Constitution won’t be attractive unless Tough Luck Libertarianism is right that it is acceptable to deny people the medical care they need. The challengers to the ACA talked a lot about slippery slopes – at the bottom of this one was a law requiring you to buy broccoli – but there’s a slope in the other direction as well. Once you decide that it’s acceptable to hold your nose and make this kind of argument, it will be easier next time.
Q. The NFIB case which the Supreme Court decided was only one of dozens of cases that have been brought challenging the Affordable Care Act. One of those cases brought by Liberty University challenged that provision of the ACA requiring large employers to offer health insurance to their employees or pay a tax penalty. Liberty University lost that case in the Fourth Circuit Court of Appeals, but the Supreme Court remanded it for reconsideration. Is there any possibility the courts will find that Congress lacks the power to require large employers to offer health insurance? Would Tough Luck Libertarianism go this far?
A. It’s hard to see how. The employer mandate is described as a tax in the statute. The individual mandate isn’t, but the Court upheld it as a tax. Chief Justice Roberts also objected to the mandate because you don’t have to do anything to be subject to it. To be subject to the employer mandate, you have to decide to employ people. Congress has had the power to regulate economic transactions for nearly a century. Even the Roberts Court isn’t going to change that.
Q. Several states are refusing to implement the insurance market reforms imposed by the ACA and one state is considering legislation that would prohibit the licensure of an insurance plan that would participate in an ACA exchange. Does the Supreme Court’s decision give any hope to states that are still refusing to assist in implementing the ACA?
A. If states won’t participate in the health exchanges, then the Federal government can and will do it for them. That has already been happening. It has been well settled for years that state laws designed to disrupt the operation of a federal law are unconstitutional.
The one part of the Court’s decision that empowers the states to stay out of the federal scheme is Chief Justice Roberts’s decision that states could refuse to provide Medicaid to their poorest citizens. The Court ruled that the states could turn down the Medicaid expansion while continuing to participate in the old Medicaid program. One might have expected that no state would turn down such a good deal: the federal government will pick up 100% of the costs until 2016, with its contribution gradually declining to 90% in 2020 and thereafter. And there is added pressure to take the money, because previous forms of federal aid were cut off. Hospital associations agreed to accept cuts to their reimbursement rates, expecting that this would be more than made up by money from patients newly insured through Medicaid. States refusing the money would not only be hurting their own working poor. They’d be rejecting a huge infusion of cash into their economies, creating many, many jobs –- good jobs, for doctors and well-paid medical technicians. That money has a powerful multiplier effect, creating jobs outside the health sector as well.
Many Republican governors have now turned down the money, but that number is shrinking. Gov. Rick Scott of Florida, for instance, recently changed his mind. The big question mark is Texas. One in four Texans is uninsured. The ACA would insure almost two million of them. The expansion would give Texas an additional $52.5 billion from 2014-2019, which is more than half of the state’s annual budget. Gov. Rick Perry has insisted that he won’t take the money. If you are a hospital executive in Texas, you probably have a fiduciary duty to do all you can to defeat Rick Perry. Meanwhile, the Court has succeeded in hurting millions of people. Four days before Perry announced his decision, the federal Agency for Healthcare Research and Quality ranked Texas as having the worst health care in the nation. This is the Court’s notion of “liberty.”
Timothy S. Jost holds the Robert L. Willett Family Professorship of Law at the Washington and Lee University School of Law. He is a co-author of the casebook, Health Law, used widely throughout the United States in teaching health law, and of a treatise and hornbook by the same name. His other publications are simply to numerous to list.
Andrew Koppelman is John Paul Stevens Professor of Law, Northwestern University. He has written extensively about the legal debate surrounding the Affordable Care Act for Salon. His latest book, The Tough Luck Constitution and the Assault on Healthcare Reform, will be published by Oxford University Press on March 22, 2013 and available online and through bookstores everywhere.
“Andrew Koppelman has magnificently captured the current legal, political and policy-related lay of the land in Washington. His insightful analysis here should be mandatory reading for anyone concerned about the future of health care in America.”
–Tom Daschle, former Senate Majority Leader