King V. Burwell — A Perspective From Policy Affairs Director, John Barkett

July 10, 2015

On June 25th, the Supreme Court handed down a much-anticipated decision on the King v. Burwell case. The case, which concerned the status of subsidies for individuals purchasing plans under the Patient Protection and Affordable Care Act (ACA), would either reaffirm subsidies for plans on the federal exchange or eliminate them. The case was based on a small quirk in the language of the ACA, but was poised to undermine the entire Act if the Court had voted in favor of the plaintiffs.

The historic 6-3 decision in favor of allowing subsidies on both state and federal exchanges ensured that a key provision of the ACA — one that is largely responsible for the gains in insuring the uninsured — remains in place.

John Barkett, Director of Policy Affairs for Towers Watson’s Exchange Solutions, explained the impact of the ruling in a recent article for Managed Healthcare Magazine.

First, according to John, with subsidies allowed for purchases on both federally and state-run exchanges, all exchanges will continue to operate as they have over the past two years. Second, over time more states that have established their own exchanges will likely transition to the federally run exchange. (As prior evidence of this trend, Oregon, Nevada, and Hawaii all transitioned to the federal exchange in the last year.)

Conversely, had the Supreme Court ruled for the plaintiffs, an estimated 6.4 million people would have lost their tax credits and seen their monthly premiums increase an average of $263 per month, causing many individuals to no longer afford coverage and drop out. Healthy people in particular would likely drop coverage, leaving a larger percentage of sick people in the risk pool. These cascading effects could have effectively undermined the ACA.

The ruling, said Barkett, also is notable for what it won’t do. “The ruling won’t disrupt the individual insurance market. It won’t force millions of people off their plans. It won’t deprive managed care organizations of millions of customers. The Affordable Care Act is here to stay. Healthcare providers and purchasers should focus on how they can best leverage the ACA in their business strategies.”

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