Arkansas Officials Consider Scenarios In Obamacare Court Ruling

Jun 17, 2015

Supporters of the Affordable Care Act gather in front of the U.S Supreme Court during a rally in March. The court heard arguments in the case and is expected to announce its decision in June.
Credit NPR / Alex Wong/Getty Images

It’s possible that by Thursday, a U.S. Supreme Court decision will result in 68,232 Arkansans losing insurance subsidies provided through the Affordable Care Act, otherwise known as Obamacare. If that happens, state policymakers will have to decide how to respond.

At issue in the case of King v. Burwell is whether the IRS can provide tax credit subsidies for individuals who purchase health insurance through the online exchange established by the federal government. Section 1321 of the Affordable Care Act says that subsidies are available for individuals in exchanges “established by the state.”

The government (Burwell, as in Sylvia Burwell, secretary of Health and Human Services) argues that Congress did not mean to exclude states that now use the federal exchange. However, the plaintiffs say that under a strict interpretation of the law, individuals in states that do not have state-based marketplaces would not be eligible for the subsidies.

That would include at least 34 states, including Arkansas.

Many say the loss of those subsidies, which help lower-income Americans buy health insurance, would result in a mass exodus from the insurance marketplace and the eventual collapse of Obamacare.

Rulings are expected to be issued on this and other controversial issues, including same-sex marriage, as early as 9 a.m. CST Thursday. If the court rules for King, the subsidies would go away. If that happens, it’s uncertain how President Obama and a Republican Congress could work together to create a temporary fix to Obamacare, much less a permanent one. Many Republicans see a pro-King ruling as an opportunity to end Obamacare.

ARKANSAS PREPARES
Arkansas is preparing for the various scenarios, said J.R. Davis, spokesman for Gov. Asa Hutchinson’s office. However, he said, “At this point, it’s difficult to say what our response will be because we don’t know what the ruling will be by the court.”

At the state level, a Republican-led Legislature that barely passed the private option, which provides private insurance to lower-income Arkansans through Obamacare, would be called upon to rescue another part of Obamacare.

State Sen. Jim Hendren, R-Sulphur Springs, who is heading a task force studying health reform in Arkansas, said legislators would have to meet in special session to react to a pro-King ruling. An opponent of Obamacare, Hendren said legislators would be obligated to do something, but it would be a “contentious debate.”

“To me, any time there’s that kind of turmoil and that kind of radical change in the administration of a program, it’s not only appropriate, but it’s our responsibility as legislators to come back in and address that,” he said.

Hendren said the issue would be further complicated by the fact that so many states would be in a similar situation. What happens if Arkansas converts to a state-baed exchange but many other states don’t?

“(Thirty-seven) states that have federal exchanges are going to have to make similar decisions, and in fact, I think there’ll be a lot of discussion between those (37) states,” he said. “Are we all going to sink or swim together, or is it every man for himself, or how are we going to respond to this if there is a dramatic change?”

Dustin McDaniel, Arkansas’ former attorney general, said the justices can decide the case based on two competing legal theories.

One way would be a strict constructionist view where the justices interpret the law technically. If Congress made a mistake in writing the law, then it’s up to Congress to repair the mistake. The other principle would be that the Supreme Court should not interpret the law to a “ludicrous outcome.” The law easily could be fixed with clean-up language, McDaniel said, but that would be unlikely coming out of this Congress.

Court watchers are counting votes trying to predict which way the justices will rule. McDaniel expects the justices to rule in favor of King. “I just don’t see how they uphold the federal subsidies on the basis of the law as it’s written,” he said.

If the Supreme Court rules for King, could subsidies, thereby being illegal, end immediately? Hendren said he “can’t imagine” that happening.

Arkansas’ exchange is currently run as a federal-state partnership, but under legislation passed in 2013 it is in the process of setting up its own state-run exchange. On June 15, the U.S. Centers for Medicare and Medicaid Services conditionally approved Arkansas’ application.

However, under Act 398 of 2015 by Hendren, the state is prohibited from setting up an exchange without legislative approval if the Supreme Court rules for King. Hendren said he sponsored the bill so the Legislature would have a say if the rules change.

Without a doubt, a pro-King ruling would have a huge effect on Arkansas’ health care landscape. Apart from the 68,232 Arkansans receiving subsidies, it would indirectly affect insurance ratepayers and those on the private option.

“There would need to be a great deal of analysis to really get a good sense of what sort of impact that would be and how much premiums could change,” said Amy Webb, spokesperson for the Department of Human Services. “For now, premiums are fixed through the end of the calendar year. We’d also want to see how Congress and the president respond.”