Split federal appellate court rulings yesterday created uncertainty about the subsidies that allowed many New Jersey residents to buy health insurance through the federal marketplace this year, and reopened debate on whether to have a state insurance exchange.
A three-judge panel of the U.S. Court of Appeals for the D.C. Circuit ruled that language in the 2010 Affordable Care Act prevents the federal government from providing tax credits to low- and middle-income residents, while a Richmond, VA-based 4th Circuit court panel reached the opposite conclusion.
The rulings could affect New Jersey and 35 other states that rely on the federal marketplace, while leaving unchanged the subsidies provided in states that operate their own insurance exchanges. Both decisions could be appealed to the entire circuit court and could ultimately reach the U.S. Supreme Court.
A D.C. Circuit court ruled 2-1 that language in the ACA specifically allowed for subsidies for insurance sold through state-based exchanges, but didn’t include that same provision for the federal marketplace. The 4th Circuit panel ruled 3-0 that the law allows federal regulations to provide for insurance subsidies in both state and federal exchanges.
Sen. Joseph F. Vitale (D-Middlesex) expressed concern about the D.C. Circuit ruling, and said he would support a new effort to launch a state-based exchange if the decision is upheld.
“It’s not good news, which is why New Jersey and all the red states that decided not to participate (in state exchanges) put their own citizens at risk, so they really ought to revolt,” said Vitale. He described opposition to a state exchange as “absurd,” since the state is in the best position to regulate an exchange and could receive millions of dollars in federal funding for outreach.
“I don’t see at that point how any administration could deny a state-based exchange,” Vitale said. “There’s so many people using the exchange and having the benefit of the subsidy to make their healthcare affordable. It certainly wouldn’t make Gov. [Chris] Christie popular with some of his Republican colleagues around the country, but it would be the right thing to do” Vitale said of allowing a state-based exchange.
Of the 161,775 New Jersey residents who chose marketplace insurance through April 19, 84 percent -- or roughly 136,000 people -- received subsidies. The subsidies are available to all residents with incomes between 100 percent and 400 percent of the federal poverty line, which amounts to between $11,670 and $46,680 for a single person and between $23,850 and $95,400 for a family of four for plans sold this fall.
These subsidies made the plans affordable for most of these residents, noted Linda J. Schwimmer, vice president of the New Jersey Health Care Quality Institute. She added that they were the outstanding feature of the marketplace in the state, since New Jersey already provided many of the same protections as the ACA for those who previously bought individual insurance.
“Were we to lose those subsidies, that would really be a blow to all of those people who were able to get insurance for the first time here because of affordability,” she said.
Not everyone was concerned about the D.C. Circuit ruling. Americans For Prosperity-New Jersey officials, who would like to see the ACA repealed, supported it. Organization spokesman Mike Proto said the law “remains unpopular and unworkable” and that the organization would oppose any effort to establish a state exchange.
“One of the problems with the state-based exchange is that it was not really going to be state-run,” since it would have to abide by regulations set by the U.S. Department of Health and Human Services, Proto said.
Insurance industry lobbyist Wardell Sanders emphasized that residents -- including those receiving subsidies -- shouldn’t anticipate any immediate changes to their coverage.
“The federal government has a number of procedural options for how to react to the decisions, and this issue could take months or longer to be fully resolved,” Sanders said in a statement, adding that the insurers are focused on “ensuring, stability, affordability, and accessibility for consumers.”
Seton Hall University health law and policy professor John V. Jacobi said that both panels used the same legal mode of analysis -- focused on how clear the ACA is on which exchanges can provide subsidies -- to reach completely different conclusions. But Jacobi feels that the 4th Circuit ruling is stronger, since it took into account the effect of subsidies on the entirety of the law while the D.C. Circuit focused on a very limited piece of the legislation.
Jacobi said the D.C. Circuit decision conflicted with a legal principal that the decision itself acknowledged -- that if a provision of a law would lead to a result that contradicts the purpose of the law, a court should be careful in interpreting that provision in a way that would lead to “an absurd result.” The 4th Circuit instead would allow federal regulators leeway as to how the provision should be interpreted.
However, Jacobi shied away from predicting how the case would be handled when it’s appealed. “What the Supreme Court will do when it gets the case is anybody’s guess,” he said.
Jacobi said it’s “probably sensible” for legislators to consider reintroducing a state-based exchange if the D.C. Circuit opinion is upheld.
“In prior years, we would have said that Congress would go back and fix this,” but Congress is stalemated, he noted. “I hope it doesn’t come to that. I hope that the D.C. Circuit decision does not hold.”
Lawyer Edward I. Leeds of Ballard Spahr in Philadelphia said that if the D.C. Circuit decision is upheld, its effect on employers would also be significant. Beginning on January 1, 2015, many employers are mandated to provide insurance to workers who average more than 30 hours per week, or to pay a penalty for uninsured workers if they have one worker who received an insurance subsidy.
But if the subsidies weren’t in place, “there’s no teeth to the mandate anymore,” said Leeds, who’s provided counsel to New Jersey businesses about employee benefits.
Like Jacobi, Leeds said the decision could put this onus back onto legislators and Christie. If it’s upheld, “it does put pressure back on the states to modify (their exchange) because they have many, many people who will lose subsidized health coverage as a result.”
Members from both parties in the state’s congressional delegation responded to the decisions. Rep. Leonard Lance (R-7th) said the market, insurance companies, and consumers were left “in limbo” and that the U.S. Supreme Court should hear the case in the term starting this fall.
“This is the exact reason why Congress should not pass thousand-page bills without thorough analysis,” Lance, who has been opposed to the ACA, said in a statement. “The administration has consistently been forced to rework, delay or completely ignore parts of the president’s law as it finds the statute unworkable.”
Rep. Bill Pascrell Jr. (D-9th) said the uncertainty underlined the consequences of Christie’s decision to veto bill that would have established a state exchange. He noted that the state lost millions of dollars in federal aid to reach out to residents by not having a state exchange.
“The question is, if this ruling stands, will Gov. Christie continue to refuse to set up a state exchange and stand with the Tea Party ideologues who will do anything to deny New Jerseyans comprehensive affordable health coverage? ” Pascrell said in a statement, adding that Christie could put residents’ fears to rest by setting up a state exchange.