With the fate of President Barack Obama’s top legislative accomplishment hanging in the balance, state officials are increasingly concerned by the administration’s refusal to discuss contingency plans for insurance markets, should the Supreme Court later this month strike down 2010 health care law subsidies for 6.4 million low- and middle-income people.
Officials in a variety of states, including many led by Republicans, say they are panicked by the uncertainty a ruling against the government in King v. Burwell could unleash. Justices are weighing whether the health care overhaul allows federal subsidies for coverage to be offered in all states, or just in those that, as the law states, are “established by the state.” Sixteen states and the District of Columbia have created their own state-run health insurance exchanges; the others that rely on the federal Healthcare.gov website to enroll people could see aid disappear.
State officials expected the administration to be publicly tight-lipped about the prospect of a ruling against the law. But some say they are surprised that, so far, the administration does not appear to be holding private discussions about how to address potential fallout. Affected states would have to address unique technical and legal quirks associated with covering their residents, as well as political obstacles.
“Whatever the administration might be doing in terms of backup planning, they are not talking to the states about it, and groups like us are not privy to it,” said Ron Pollack, executive director of the advocacy group Families USA, which supports the law. “The administration — and I really want to emphasize this — is confident that it will prevail in court and it doesn’t want to do anything to undermine that possibility.”
Governors would face enormous pressure to promptly respond should justices rule against the existing system for distributing subsidies. Although Supreme Court Justice Samuel A. Alito Jr. has suggested the court might carve out a grace period, health coverage for 2016 plan years must kick in on Jan. 1. State officials and health plans would have to scramble to come up with alternative coverage frameworks or risk letting people who lose subsidies become uninsured.
“For the governors, it’s a tough situation for all of them,” said Seema Verma, a consultant who advises seven states. “No one wants to see people lose coverage. ... What’s ironic is that there’s no discussion from the federal government to say, ‘Here’s our plan.’ Especially in the short-term situation, people are going to look to them to outline their plan and they have yet to do that.”
A group of 30 state insurance commissioners visited Capitol Hill in late April, and many asked their congressional delegations to pass a law this year extending the subsidies. Congressional Republicans are split on that.
The administration may be trying to avoid talk of contingency plans, fearing it would encourage wavering justices to strike down the subsidies. But that appears to have deprived the 34 states that depend on Healthcare.gov of legal and technical advice on how they could comply with a ruling and declare an exchange their own.
Health and Human Services Secretary Sylvia Mathews Burwell wrote in a Feb. 24 letter to lawmakers that “we know of no administrative actions that could, and therefore we have no plans that would, undo the massive damage to our health care system that would be caused by an adverse decision.”
States would have a hard time setting up their own marketplaces in time for the 2016 term year because of time and financial restraints, though this week Pennsylvania Democratic Gov. Tom Wolf sent an application to federal officials seeking the option of creating a state-based marketplace. Wolf asked the federal government to continue administering some functions, if the state does proceed with its own exchange.
Delaware also would like to become a state-based marketplace, Burwell said.
Several states are considering ways to leverage Healthcare.gov’s technology or that of other exchanges, such as Connecticut’s, which has been deemed one of the most successful state markets in the nation.
Some states are discussing ways to lease technology. Under one scenario, states could give the federal government a percentage of a fee assessed on every insurance policy sold in the marketplace. The money is ordinarily used to pay for operation of the exchange. Under another idea, the federal government could provide it for free.
Seven states have contacted Connecticut to inquire about the costs of using its technology, said the exchange director there, Jim Wadleigh.
Some governors are weighing whether they can use executive orders to deem their use of Healthcare.gov or another state’s technology as a state-run marketplace, or whether HHS could do so, especially if the state already oversees tasks such as evaluating applicants’ eligibility, overseeing marketing or helping to authorize participating plans to sell coverage.
Another option being floated is establishing a regional marketplace serving several states. But that would require extensive coordination and could prove logistically difficult.
Many solutions would also require the signoff of a state’s legislature, especially those requiring new spending or the acceptance of federal money. Some states are not allowed to enter into contracts without approval from the legislature or state comptroller, so agreements to use Healthcare.gov technology would have to be done through a different type of pact, such as a memo of understanding.
Nine states — Arizona, Arkansas, Georgia, Missouri, Montana, New Hampshire, North Carolina, Utah and Wyoming — have prohibitions on creating exchanges without legislative approval, according to the National Conference of State Legislatures. Efforts to change the status quo could be difficult, because most legislatures have adjourned for the year.
“We don’t typically call special sessions unless there is agreement coming in,” said Monica Lindeen, the Montana insurance commissioner and the president of the National Association of Insurance Commissioners. “Otherwise, it’s just a waste of time and money.”
Against this complicated backdrop is the ticking clock.
Insurers in many states have already submitted their proposed premium bids for 2016 and are undergoing reviews from regulators. Rate submissions for the federal marketplace are supposed to be finalized by Aug. 25 so the information can be added to Healthcare.gov and insurers can ensure the online data is correct.
HHS officials may be able to slightly delay deadlines to give states time to sort out their plans or review any revised, higher premium rates from insurers.
But the next open enrollment period under the law is scheduled to start on Nov. 1, a date that is difficult to change not only because it is set in a federal regulation but also because federal officials want to give consumers time to consider their health insurance choices before coverage begins Jan. 1.
“All of the challenges make it very difficult for states to plan,” said University of Michigan law professor Nicholas Bagley.
Marissa Evans contributed to this report.