Subsidies Upheld, State-Run Exchanges Face Funding Issues
By - The King v. Burwell ruling will likely be the last major hurdle the Affordable Care Act (ACA) faces from court challenges.
Says Bill Melville, Market Analyst for Decision Resources Group, to RevCycleIntelligence.com, even if subsidies are upheld and enrollments do not face increasing threat of subsidy loss, many state-run exchanges could still face substantial funding issues. Even more could piggyback on the healthcare.gov platform, he says.
When the Supreme Court upheld the law back in 2012, but made Medicaid expansion voluntary for states, the result was the creation of a country of healthcare haves and have-nots, Melville maintains. The exchange markets will not see major changes for 2016 with subsidies upheld, he says. Although this ruling will not be the last legal challenge to the law, it will likely be the last big one, he adds.
RevCycleIntelligence.com asked Melville to provide more clarity on the future landscape of the ACA to explain what’s next upon the healthcare horizon.
RCI.com: What remaining legal threats exist? What upcoming ACA challenges exist?
Bill Melville: Legal questions will arise for a long time as little pieces of the law are picked apart. As far as legal threats that could potentially break the whole law down, I don’t know that we’re going to see that again on this level. A minimum of 6 million people might have lost subsidies if this didn’t pass. The broad impact would have affected everyone who had commercial coverage as the markets are all interconnected.
It’s a relief to not have to deal with that, but there are still plenty of threats to the law. From the money end, this is about federal exchanges. The state run exchanges are far from being out of the woods.
The next challenges could be in establishing the Affordable Care Act. When even a state like California is struggling to make ends meet, it makes you wonder how much of a future state run exchanges might have. For state run exchanges with an end-around ability, such as Nevada, Oregon, or Hawaii, where they say we’re a state run exchange but we’re going to contract for healthcare.gov for technology, going forward might be a more common avenue to take to avoid financial ruin.
RCI.com: What do you anticipate happening in regard to upcoming Medicaid expansion and state risk?
BM: There is still a bit of wonder as the decision came to pass with Medicaid expansion, if some states were just holding onto it. Maybe there will be a few more conversions but it seems unlikely going forward. In 2017, states are going to have to start paying for a portion of that expansion population.
New Mexico, Colorado, and Nevada, all had tremendous gains, beyond Medicaid estimates. That 5 percent they may end up paying in 2017 could be a pretty big figure. That might discourage some of the states that haven’t taken that expansion yet from making that move.
I don’t know how many more states we’re going to see take up expansion in the short term, but 2016 is the last year for the federal government to cover 100 percent. That could be a prohibitive factor for some states.
There is an anticipated risk for states. States might not be ready for that impact. In a lot of cases, people coming into Medicaid were older and sicker, states excluded childless adults prior to this expansion, there was a population that probably never had health coverage and are being covered for the first time.
If you took Medicaid expansion when you could in 2014, you might start seeing some bending in the cost curve by 2017, or at least a more steady cost trend. Medicaid enrollment was expected to be more gradual and it wasn’t. Without managed care or care coordination to keep people adhered to drugs and adhered to treatment, you can see much higher costs when people are not using the system efficiently.
RCI.com: What do you anticipate now coming into the spotlight following last week’s Supreme Court ruling?
BM: Premiums are going to be in the spotlight because this is the first year they’re being calculated in full-year claims.
The Cadillac tax piece, built into the funding of the ACA to help fund things down the road, is the last big piece to be implemented in 2018. It is a big concern for union-sponsored health plans where something will have to change, perhaps within this or the next administration. It could have a big impact on employers on both large and small as we go forward.
The co-op health plan associated with the ACA is another thing people will be keeping a close eye on. There a concern where if one co-op fails, are the others going to follow, too? The idea is nonprofit co-ops would return their profits to members by lowering premiums. Some that did that last year are ratcheting premiums back up this year.
RCI.com: What are your overall reactions regarding the ruling and its recent unfolding?
BM: Luckily, this court ruling was pretty straightforward and just clarified things, more of a business than usual ruling than the ruling from 2012 when they ruled the ACA was constitutional but they also ruled Medicaid had to be optional, which ended up being a major change in how the law was implemented.
We are watching to see how 2016 open enrollment unfolds and how the premiums look. Every state has their own destiny in this. We need to keep track of changes in success and politics moving forward.
