START OF 2018 OPEN ENROLLMENT PERIOD

Time: D H M S

King v. Burwell: Time is NOT on the states' side (UPDATED)

Let's suppose that the Supreme Court, against all logic, legal precedent, reason and decency, does end up ruling in favor of the plaintiffs in the King v. Burwell case and does indeed stop any federal tax credits/subsidies from being provided to people in states which are being run through the federal ACA exchange instead of their own. Let us further assume that this ruling does come out sometime in mid-June, 2015.

Let us further assume that the Republican-held Congress, being the colossal dicks that they are, do not take any action whatsoever--or, more likely, vote on a bill which would fix the "...state exchange" problem but would also have a completely unacceptable poison pill attached (ie, removing the individual mandate altogether, or killing the 80/20 medical loss ratio, or allowing insurance companies to deny coverage based on pre-existing conditions...you get the idea).

In other words, let's assume that the only way of avoiding an epic destruction of the entire individual/family health insurance market ends up being for all 34-37 states (I'm not entirely sure what the legal status of Oregon, Nevada and New Mexico is) to "establish" their own "exchanges" (via whatever the minimal effort/paperwork/expense necessary to satisfy the SCOTUS ruling is).

In order to do this, each state would require 3 things:

  • 1. The will to do so.
  • 2. Funding to do so.
  • 3. Time to do so.

The first of these is entirely up to the Governors and State Legislatures of those states...almost all of which are Republican-controlled. It would be up to the insurance industry, hospital industry, medical professional associations, AARP, political advisors, consumer advocates and so on to put as much pressure as possible on them.

However, let's assume for the sake of argument that some, at least, of these states do (grudgingly) agree to do the bare minimum necessary to save their political hides along with the insurance market.

The second issue is money. The deadline for applying for federal funds to help set up the exchanges has long since passed, so each state would have to come up with their own funding. Furthermore, as of January 1st, every state exchange has to be self-sufficient (or at least, there aren't any more federal funds coming later on either), so that would have to be taken into account.

How much would it take? Well. I don't know how much every current state spent on their respective exchanges, but it looks like a fully-operational exchange (ie, their own separate website/etc) would run somewhere between $40 - $60 million apiece. That's not an insane amount of money, but it's not chump change either, especially for the smaller states.

Of course, assuming that Oregon, Nevada and (especially) New Mexico (which is the state whose situation would be closest to the 30-odd in question) are all "kosher" in terms of being "established by the state", presumably the actual dollar costs involved would be minimal, since HC.gov would still be running the actual technology/website side of things. The states would still have to set up a legal entity, elect/appoint a board of directors, gin up some official documentation, a mission statement, list of bylaws, meeting schedule, an informational website (which then redirects you to HC.gov), promotional materials and so forth. How much would that cost? I dunno...perhaps 5% of the amount above? A couple million bucks? Beats me, although it'd be interesting to find out just how much the has been spent on the New Mexico exchange to date.

Anyway, let's suppose that #1 and #2 are squared away. Against all odds, the Republican governors and legislators of these states get their heads out of their asses and actually approve all of the above.

That leaves #3: Time. Even if everything was streamlined and fast-tracked (and lord knows that's unlikely), it would still take substantial amounts of time to do all of this.

According to consulting firm Leavitt Partners (via the Center for American Progress), it would take up to 18 months for a state to set up their own "full" exchange (website/platform et al). Using the "HC.gov piggyback" method which I'd imagine most states would go for (again, assuming it's allowed), it might take less time--perhaps 6 months or so from the point that such legislation is passed and signed.

And that's the problem. Again, as the CAP notes:

  • A ruling in June would be only months before open enrollment for 2016 begins in October, leaving little time for states to act.
  • Of the states that would lose tax credits, only eight have legislative sessions that extend beyond June. Because states need to have the legal authority to set up a marketplace—and because most governors do not have the statutory authority to act on their own—state legislatures would need to act.

In other words, even if the various state legislatures and/or Governors wanted to go ahead and slap something together, almost all of them would have to do so BEFORE the Supreme Court ruling.

That is, they'd have to start RIGHT NOW...and even then it would be awfully tough timing.

I suppose the Governor or legislatures of the other 2 dozen states could call for an "emergency session" the day after the ruling comes out. We're already well into fantasyland at this point, so why not?

Of course, the HHS Dept. could smooth the way as much as possible. Timing-wise, the smartest thing they could to to help would be to set the 2016 enrollment period not to start until November 15th as it did this time around--that would buy the states an extra 6 weeks (that doesn't sound like much, but 4.5 months is still a hell of a lot better than 3 months).

Let's be frank, though: the states are sitting on their butts now, taking a "wait and see" approach. Even the few Democratically controlled states (Delaware and (sort of) Illinois) are twiddling their thumbs...in fact, Illinois had plenty of chances to receive federal funds for their own exchange but ended up blowing it off and missed the deadline.

There's one other possibility which may arise, however: It's always possible that the Supreme Court may end up ruling in favor of the King plaintiffs...but they may also put a "stay" of, say 1 year (better yet, 2?) on the order, allowing the federal subsidies to flow for next year, and buying those states an extra year to get their ducks in a row.

I'm hoping that John Roberts just shoots down the whole silly mess, but if he doesn't, I could see this being his way of being "reasonable" about it: Giving the states an extra year or two to get their butts in gear (or, alternately, an extra year or so for the Republicans in Congress to quit being jackasses).

It's a long shot, but it's something.

UPDATE 1/31/15: I asked Nicholas Bagley, the U of M law professor who has been sounding the alarm the most about the potential mess caused by the SCOTUS ruling against the federal exchange subsidies, what the odds are of a stay being granted. It turns out that he actually addressed this very issue over a month ago and his thoughts on the matter were, to put it mildly, not encouraging (thanks to Ken Kelly for the link):

the Supreme Court has, on rare occasions, muffled the impact of decisions that might have proven socially disruptive.

...the Court’s judgments would only apply going forward—in the lingo, Northern Pipeline and Buckley would only have prospective effect. In addition, the Court entered brief stays to enable Congress to fix the constitutional problems.

... In plain English, that means the IRS need not claw back tax credits that were paid out before the Court’s decision.

OK, so far, so good: At the very least, the millions of people who will have already received tax credits for up to 18 months by that point probably won't have to pay them back retroactively. So, you know, hooray for that much, I suppose...

But what happens after June? Unless the Supreme Court stays its decision, the IRS would have to abruptly stop issuing advance tax credits. The effects would be felt almost immediately: 4.5 million people would see their insurance rates surge; many of them would drop coverage; and insurers’ risk pools would skew toward the unhealthy, leading to enormous losses. In a word, there would be chaos on Healthcare.gov.

Actually, assuming my projections end up being correct, even the number directly impacted would be even greater: 12.5 million selections x 88% paying x 75% via the Federal exchange x 87% receiving subsidies = around 7.1 million people currently receiving credits via HC.gov.

Could the Supreme Court draw on Northern Pipeline and Buckley to enter a stay? Sure, in principle. But don’t count on it. Decided more than thirty years ago, the cases display more comfort with the Court’s power to tailor its remedies than do cases decided more recently. In the 1993 case of Harper v. Virginia Department of Taxation, for example, the Court held that it would no longer countenance giving only prospective effect to its judgments. Doing so, the Court suggested, was “incompatible with the judicial role.”

Entering a stay in King might similarly smack of legislating from the bench...As I explained in my last post, enabling such withdrawals raises especially serious constitutional concerns.

All that said, I can see a narrow path to getting a stay. ...it doesn’t strike me as especially...But it’s possible...

In his direct response to me, Bagley was even more grim:

@_KJKelly @charles_gaba That is the last word. Almost a 0% chance of a stay.

— Nicholas Bagley (@nicholas_bagley) January 31, 2015

Even worse, I have another update to Prof. Bagley's essay:

In the meantime, it would be foolish to bank on a stay. The states have seven months to develop contingency plans before the Supreme Court rules in King. If they squander the time, they’ll lose their best chance to avoid massive disruption for millions of people.

Well, so far they're doing nothing but squandering their time...and it's down to 5 months now.