Hoo, boy...Could a GOP win in House v. Burwell result in 6 million people losing their coverage altogether??

Hey, remember back in May, when I noted that the House v. Burwell court case could, if ultimately won by Congressional Republicans, end up with several million people getting stuck with an extra $1,000/year in premium costs?

The short version was this:

  • In addition to the ACA providing "APTC" tax credits to those who qualify, the ACA also provides "CSR" (Cost Sharing Reduction) assistance to those who a) are under 250% FPL and b) enroll in Silver exchange plans.
  • The CSR payments don't actually go directly to the enrollee; instead the insurance carriers cover the appropriate chunk of deductibles/co-pays, with the CSR funds going to reimburse the carriers.
  • Former House Speaker, Republican John Boehner, sued the HHS Dept. and the Obama administration over CSR appropriations, claiming that since Congress never specifically appropriated funding for CSR payments, it's illegal for the HHS Dept. to reimburse the carriers.
  • So far, the federal judge in the case has sided with the House Republicans, although the case is still winding it's way up the ladder, presumably to eventually end up at, yes...the Supreme Court of the United States (which has to be sick to death of being dragged into the middle of Obamacare yet again)
  • For the moment, the CSR assistance/reimbursements continue to flow...but if they were to be cut off, the insurance carriers would still be legally required to keep paying out CSR assistance, even though they wouldn't be reimbursed by the HHS Dept.
  • This would result in the carriers either a) filing potentially millions of lawsuits to get legally-mandated reimbursements for each individual CSR claim, which would clog up the courts, or, more likely, b) it would result in the carriers basically saying "screw this, I'm just gonna jack up rates by $1,000 a pop to cover my CSR losses".
  • However, due to a quirk in how the metal levels and CSR rules work, only Silver plans (the ones with CSR) would have their rates increase...meaning that Gold plans could end up costing less than Silver, which would just confuse the hell out of everyone.

As I concluded back in May:

Again, the worst-case scenario would be the hot mess I described above--jacked up rates for lots of full-price payers, confusing metal level pricing and continuing uncertainty/nervousness about the law itself among insurance carriers and the public alike, which is of course one of the primary goals of the GOP in the first place. As Bagley notes, however, it would not destroy the law, just gum it up.

Got all that? OK.

Well, it turns out that there may be a completely different outcome after all (via Amy Lotven of Inside Health Policy):

CMS Gives Plans An Exit Path If House Gets Courts To Ax Cost-Sharing Reductions

CMS has provided industry its sought-after out should the federal courts agree with House Republicans that the administration illegally allowed the ACA's cost-sharing reductions to flow to health plans without congressional appropriations. The agency included in the qualified health plans' agreements for 2017 a clause that acknowledges their filings were based on assumptions that the CSRs would be in place, and thus their disappearance would be a cause for termination subject to state law.

...The case is expected to be heard this fall, and a ruling could come out next year long after premiums are set. Experts are unclear what would happen if the House wins the appeal. The courts could immediately stop the payments, or potentially stay the decision until the end of the policy year.

But, even if the court blocks the administration from paying plans for the CSRs, the issuers would still be required to provide them since they're required under statute.

The contract clause drafted by CMS would give plans the option of terminating their agreements in that scenario, however subject to state law.

I asked a friend I trust on this issue to explain this to me, and here's what he said:

The typical agreement a QHP issuer enters into if selling on the FFM requires them to keep the policy in force for the entire calendar year. [This exit clause] gives them option to term the policy abruptly if the Courts rule, or a Trump administration decides, that it won't pay CSR offset payments to carriers. Because this won't hit the Supreme Court until late 17 or early 18, I think this is as much about assuaging carriers fears of a Trump admin trying to destroy the marketplaces as anything else.

In other words, a Trump administration could come in the office on January 20 immediately directing the treasury secretary to not make the February 1 payment for CSR (and only pay the APTC) that month.

Now, if Donald Trump manages to win the White House, all 320 million of us are pretty much screwed in a dozen different ways anyway (and yes, that includes anyone who votes for him, which would make for a nice bit of schadenfreude, but whatever), so ironically, I'm not terribly concerned about that; no point in worrying about whether you left the water running when your house is being swept away by a hurricane, after all.

However, assuming Hillary Clinton wins, if the Supreme Court does eventually rule in favor of the House Republicans, it sounds like this clause means that it would give every carrier participating in ACA exchanges (at least the Federal exchange (HealthCare.Gov), anyway) the legal right to terminate those policies.

As of March 31st, there were about 6.3 million exchange enrollees receiving CSR assistance. I'm not sure if these termination clauses would apply to only those folks or everyone on exchange plans, but it'd still be a huge number of people either way. Now, this may be mitigated by state or other federal laws preventing such mid-year terminations...but then again, it might not (or it might only apply in some states but not others).

The bottom line is that it's starting to sound like a Republican win in House v. Burwell could end up being just as devastating to the ACA as a plaintiff win in King v. Burwell would have been last year after all.

All of which raise the stakes of this election even further. A Democratic Congress would presumably go ahead and formally allocate the CSR funds just to be safe, thus rendering this case moot.

UPDATE: I asked Professor Bagley about this latest development, and he concurred with pretty much everything my source and I posted above:

@charles_gaba I can perhaps moderate the concern *slightly*. (1) States have a say in whether health plans withdraw.

— Nicholas Bagley (@nicholas_bagley) September 22, 2016

@charles_gaba (2) If Clinton wins, the odds that the House prevails in House v. Burwell drop from small to trivial.

— Nicholas Bagley (@nicholas_bagley) September 22, 2016

@charles_gaba (3) The lawsuit is a long-shot at the S.Ct. even if Trump fills a slot. Chief Justice Roberts cares about standing!

— Nicholas Bagley (@nicholas_bagley) September 22, 2016

@charles_gaba All that said ... the worst-case scenario here is unequivocally bad.

— Nicholas Bagley (@nicholas_bagley) September 22, 2016

UPDATE x2: OK, so why would the CMS division (and/or HHS...not sure whose call this actually was) agree to such an exit clause in the first place? Well, as my source speculates, seeing how the odds are strongly against a final SCOTUS ruling on the case ahppening until after the 2018 Open Enrollment period is already locked in, the only reason to issue it for 2017 would be to reassure the carriers that they'll be off the hook even if Donald Trump is elected President. My source further notes that, given how many carriers have bailed on the exchanges this year already, there's a good chance that some of those who are staying made such a clause one of their must-have requirements to stick around.

This, once again, underscores the danger of the exchanges relying on voluntary participation among private carriers. Don't get me wrong, I'm not saying that the carriers are in the wrong here, just noting that the system is set up specifically so that carrier participation is ultimately unreliable; they can drop out for a good reason, a bad reason or no reason whatsoever if they wish.

All of which makes the case for some sort of guaranteed "public option" that much stronger, in my view, whether it ends up "keeping costs down via competition" or not.