Insurance regulators in states where HHS runs the Obamacare exchanges are discussing contingency plans or workarounds should the Supreme Court strip the law’s insurance subsidies across a wide swath of the country.
The discussion of the King v. Burwell case came up on Monday at a meeting of the National Association of Insurance Commissioners in Washington, and some state officials raised questions about what would be required to convert to a state run exchange and when exactly subsidies would be canceled if the Supreme Court rules against them. Supporters of the law also warned regulators they would have to figure out how to protect consumers and prevent death spirals in their insurance markets should the Supreme Court rule against the Obama administration. The court is expected to hear the case in the spring and probably rule in June.
Wisconsin Insurance Commissioner Ted Nickel said his state has not come up with a firm direction yet, but he didn’t explicitly rule out trying to establish a state-based exchange.
“We want to make sure we’re ready for any and all possible outcomes that the Supreme Court might come up with,” he said after the meeting. “But it’s very early in the process. We haven’t come up with any firm directions or firm thoughts or alternatives.”
Republican Gov. Scott Walker, who was just reelected, has refused to set up a state-based exchange and in 2012, even returned a $37 million grant from HHS to set up its marketplace.
“Of course we’re concerned with any challenges to the ACA because we’ve made specific decisions in Wisconsin we’re operationalizing the federal law in Wisconsin,” Nickel added. “With any decisions, … we need to take those into consideration. We are looking at any contingencies that we might have to deal with.”
By HHS’ count, there are 34 federal exchange states. However, New Mexico, Nevada and Oregon are using federal IT systems to enroll people for 2015 coverage, and supporters of the King lawsuit say it would affect 37 states.
Tom Miller from the American Enterprise Institute, who briefed state regulators, said there are several requirements for states if they want to operate their own exchanges, and they go beyond the IT systems, such as establishing a governance structure. The ACA and HHS regulations require the exchanges to carry out certain functions, though generally, the law provides more general direction than the HHS rules.
“I think you’re going to have to do more than just the bare minimum,” he said.
Franca D’Agostino, the executive director of CHIP and strategic initiatives for the Pennsylvania Insurance Department, said the state has not yet had conversations given Pennsylvania is set to flip to a Democratic governor next year. But she acknowledged that incoming Gov. Tom Wolf might be more open to setting up an exchange rather than leaving it up to HHS.
“Of course we want to make sure that the citizens of Pennsylvania aren’t negatively impacted. But it’s so up in the air that I don’t think we’ve made a specific focus on what could we do,” D’Agostino said.
Illinois, which runs its exchange in partnership with the federal government, is trying to figure out how to insulate itself from a decision that would strip the subsidies. Mike Claffey, a spokesman for outgoing Democratic Gov. Pat Quinn, said Illinois applied for additional federal grant funding by the Nov. 14 deadline, and it is hoping the Illinois General Assembly moves on legislation establishing a state-based exchange during its veto session. That three-day session begins Wednesday, and then it reconvenes Dec. 2-4.
Delaware is also mulling workarounds, with a spokeswoman for the state’s Department of Health and Social Services saying that all options are on the table.
Miller said Monday he believed that the high court’s decision could spur debate on Capitol Hill about how to deal with the implications, and lawmakers could compromise even though that has eluded Congress in recent years.
“They do this when they have to, and they have no other choice,” Miller said.
Backers of the law disagreed.
“There is no quick fix,” Washington & Lee University law professor and ACA supporter Timothy Jost told insurance regulators. “It’s not just something you can snap your fingers and do.”
Jost, who is also a consumer representative to the NAIC, said the states should urge the Supreme Court to uphold the IRS’ regulations “to protect millions of Americans, thousands of whom will probably die if we have an adverse decision here.”
Joel Ario, a former HHS exchanges official and past Pennsylvania insurance commissioner, said state insurance departments must figure out what happens to subsidized enrollees and insurance companies’ ACA plans if the subsidies are eliminated.
They should not rely on people in Washington to come in and fix the problem for them, Ario said.
“Good luck with that,” he said.