Ruling Could Make Health Insurance Unaffordable For Thousands Of Kansas, Missouri Consumers
Conflicting federal court rulings are raising questions about whether consumers in Kansas and Missouri will continue to be eligible for subsidies when purchasing private health insurance through the federal insurance exchange.
A three-judge panel of the U.S. Court of Appeals for the District of Columbia said Tuesday that only consumers purchasing coverage through state-operated marketplaces are eligible for federal tax credits.
If the 2-to-1 ruling stands, consumers in the 36 states – including Kansas and Missouri – that didn’t establish their own exchanges would no longer be eligible for subsidies. On average, the subsidies have lowered the cost of premiums by 76 percent for those who purchased coverage in the federal marketplace.
In contrast to the D.C. court’s ruling, a three-judge panel of the U.S. Court of Appeals for the Fourth Circuit, in Richmond, Va., issued a ruling a few hours later upholding the Internal Revenue Service rule providing subsidies in the federal marketplace.
Obama administration officials took issue with the D.C. panel’s ruling and said they would seek to have it reviewed by all of the judges on the court.
Officials in Kansas and Missouri decided against establishing state-based marketplaces. Kansas Gov. Sam Brownback blocked Insurance Commissioner Sandy Praeger’s efforts to create one, forcing her to return a $31.5 million federal grant in the process.
As a result, consumers in both states seeking coverage under the Affordable Care Act could only use the federal marketplace, which was plagued by technical problems for months after the start of the open enrollment period.
Of the approximately 57,000 Kansans who purchased Obamacare coverage from October 2013 through March of this year, 78 percent received subsidies. In Missouri, 85 percent of the more than 152,000 consumers used subsidies to help them purchase coverage in the federal marketplace.
Kansas Insurance Commissioner Sandy Praeger, a Republican who has broken ranks with many in her party to support the health reform law, said she’s hopeful the full D.C. circuit court will overturn the panel’s ruling. But if the ruling stands, Praeger said, it would put the cost of coverage out of reach for many who were recently able to purchase it for the first time.
“If it is overturned, the irony of it is and the unfairness of it all would be that states that did their own exchange would get the subsidies and states like Kansas wouldn’t. And that’s inherently unfair,” she said. “But it would be something we brought on ourselves by not doing our own exchange.”
Kansas Attorney General Derek Schmidt submitted briefs in support of the plaintiffs in both cases. The small businesses that filed the lawsuit that resulted in the D.C. court ruling included the Community National Bank based in Seneca.
Schmidt, a Republican who has intervened in several challenges to the ACA, said the IRS ruling that permitted subsidies in the federal marketplace, or exchange, conflicted with the language of the law.
“Congress might not have expected so many states to decline to establish an exchange under the Affordable Care Act, but that misjudgment cannot justify allowing the IRS to effectively rewrite the statute to satisfy policy and political objectives,” Schmidt said.
Robert St. Peter, chief executive of the Kansas Health Institute, the parent organization of the editorially independent KHI News Service, said the entire law could be made unworkable if the ruling prohibiting subsidies in the federal exchange stands.
“It’s hard to imagine a workaround to this decision if it stands,” St. Peter said, suggesting it would undermine the mandates that require individuals to purchase coverage and employers to offer it.
“Employer penalties only kick in if employees obtain a subsidy on the exchange,” he said. “If there are no subsidies, there’s no trigger for the mandate on the employer side. On the individual side, it’s the affordability test. You’ve got to have access to affordable insurance. So without subsidies, the individual mandate is essentially meaningless.”
The loss of subsidies also would exclude many younger, healthier people from the insurance pool, said Sheldon Weisgrau, director of the Health Reform Resource Project in Kansas.
“What likely would happen is that the sickest people with chronic illnesses who really need the insurance will be more likely to figure out some way to scrape together enough money to buy it,” Weisgrau said. “Those who drop out of the market would be those who are relatively healthier. And that could be devastating for the insurance industry as a whole.”
Jim McLean is executive editor of KHI News Service, an editorially independent reporting program of the Kansas Health Institute.