ACA’s Wardrobe Includes Many Suits

By William G. (Bill) Stuart

Director of Strategy and Compliance

Benefit Strategies LLC

A federal judge recently ruled in favor of House Republicans in a lawsuit that they brought against the Obama administration over a provision of the Affordable Care Act, or ACA.

What does it mean? It’s too early to tell.

At issue is the second subsidy program available to lower-income individuals under the ACA. Readers are familiar with the advance premium tax credits, often referred to as premium subsidies, that help individuals or families who earn up to 400% of the federal poverty level to purchase insurance. These individuals receive a monthly subsidy that reduces their net premium cost.

The subsidies at issue in this lawsuit are available to individuals and families with incomes below 250% of the federal poverty rate and help offset their medical plan’s out-of-pocket costs, including deductibles, coinsurance and copays. An individual with a $3,000 deductible, for example, may pay only $1,700 or $900 or $250 of that amount in out-of-pocket costs, while the subsidy program reimburses the insurer for the balance of the $3,000.

The House Republican leadership took the unusual step of suing the executive branch over this issue. While the ACA includes this provision to subsidize out-of-pocket expenses, Republican congressional leaders argue that Congress must appropriate funds to support this – or any other – federal expenditure. Congress didn’t authorize funding for the program in the 2014, 2015 or 2016 budgets. It’s estimated that the subsidies in 2014 and 2015 total about $7 billion. The 2016 figure is expected to exceed the two-year figure as more individuals qualify for and learn about the program.

The Obama administration argues that since the ACA authorizes the credits, it has a responsibility to oversee the program and ensure that individuals and families who qualify receive the appropriate benefits. The mere existence of the program, it argues, is sufficient for the administration to administer the program without a requirement that Congress specifically allocate the funds. The administration’s position is undermined, though, by its requests (subsequently denied) for funding during the annual budget process.

How Did We Get Here?

How did we arrive at the point that the legislative branch is suing the executive branch of the federal government?

As you may recall, the ACA passed Congress six years ago without a single Republican vote. Typically, the House and Senate vote on similar bills proposed in each chamber. If the bills pass, House and Senate leaders select members to serve on a reconciliation committee to iron out the differences in the two versions and draft a single bill that goes back to both chambers for a vote. This process usually involves a lot of compromises as House vs. Senate and Republican vs. Democrat issues are debated and resolved. The new single bill is introduced in both chambers, passes and goes to the president for his signature (or veto).

During this process, proponents and opponents have ample opportunity to state their cases. Lobbyists and other representatives of special interests, read the law and have an opportunity to weigh in. And lest you think that this influence is always evil, often individuals with specialized knowledge point out deficiencies in the law (a potential unintended consequence, a goal that can be achieved better by another means, etc.) that can be corrected before a final vote.

That didn’t happen with the ACA. The House and Senate passed very different versions of the law in late 2009 and early 2010. In the meantime, Sen. Ted Kennedy (D-MA) died and was replaced by a Republican, who gave the GOP enough votes to defeat the bill that emerged from a committee. The only way to salvage health care reform was to have the House vote on the Senate version exactly as written and submit it to the president for his signature. House Democrats didn’t like some provisions in the Senate bill and wanted some of the elements of their bill be incorporated into health care reform, but to do so would send the entire effort to defeat via a Republican filibuster in the Senate. The president and House leaders (Democrats controlled the House at that point) assured reluctant members that they would make the necessary changes via executive action or future amendments to the law.

Republicans didn’t have an opportunity to offer any input on the bill as it wended its way through Congress. Democrats controlled the committees that drafted the legislation, filled all leadership positions in both chambers and had a majority of the votes in both chambers. They didn’t need a single Republican vote to pass the law.

Republicans resented being shut out of the action. They never embraced the law and, after its passage, Republicans, conservative groups and individuals and organizations of conscience have sought means of eliminating the law entirely or removing provisions with which they disagreed. In a 2012 decision in National Federation of Independent Business (NFIB) v. Sebelius, the Supreme Court upheld the “individual mandate” – the requirement that every American enroll in insurance or pay a penalty.

In the same decision, the Court struck down the Obama administration’s implementation of a provision in the law that gave states the opportunity to expand Medicaid to extend coverage to (primarily) individuals with low incomes. The administration sought to penalize states that refused to expend Medicaid eligibility by reducing funding to the sates existing Medicaid program.

Three years later, the Supreme Court again heard a challenge to the ACA in the case of King v. Burwell. The law specifies that the advance premium tax credits are available to individuals who purchase insurance on “an exchange established by the state”. Following passage of the ACA, only 16 states (including Massachusetts, Connecticut, Rhode Island and Vermont) established state-facilitated marketplaces, while the balance (including New Hampshire and Maine) defaulted to the federal-facilitated marketplace ( The plaintiffs argued that the premium subsidies therefore could be issued only to qualifying individuals and families in the 16 states with state-facilitated marketplaces.

Had the Court agreed, the decision would have been a devastating blow to the ACA. Without premium subsidies, individuals and families in 34 states would have to pay the entire premium – in many cases raising their premiums by 300% or more. The Court in June 2015 ruled that the law authorizes premium subsidies for legal residents of all 50 states, regardless of whether a state’s marketplace is run by the state or federal government.

Other parties, including the business Hobby Lobby and the charity Little Sisters of the Poor, have challenged the law’s contraception mandate, arguing that their faith prohibits them from paying for certain forms of contraception, including medication to induce abortions. Federal circuit courts and the Supreme Court have been split on these issues.

And now, in mid-May, Highmark, a large insurer in western Pennsylvania, filed a lawsuit against the federal government over risk-adjustment payments. Under the ACA, insurers covering a healthier population in the small-group market are supposed to make payments to insurers with sicker populations.  The “losers” far outnumber the “winners,” though, and the federal government collected only about 12 cents in payments for every dollar of losses. Therefore, it can pay only about 1/8 of the amount promised to insurers with losses.

Highmark claims that it lost $260 million covering individuals and families in the ACA marketplaces in 2014 and has lost $773 million since the law’s inception – a level of losses common among nearly all insurers participating in public marketplaces. The company is seeking 100% of the risk-adjustment payments to which it’s entitled based on its losses. And they may not be alone in suing the federal government.

What’s Going to Happen Next?

First, the campaign rhetoric around the ACA and health care reform will be white-hot. Presumed Democrat presidential nominee Hillary Clinton wants to retain and “improve” the ACA. Her improvements consist of reducing out-of-pocket responsibilities and regulating pharmaceutical manufacturers more heavily. Presumed Republican nominee Trump has been somewhat disjointed in his discussion of health care. It’s likely that he’ll make health care a major issue in the fall campaign.

Meanwhile, 34 Senate seats (24 Republican and 10 Democrat) are up for grabs. In 2010, the last time this Senate class ran, 14 GOP newcomers entered the Senate, propelled to Congress by two intertwined political forces: the Tea Party movement in the Republican Party and the unpopularity of the ACA, signed into law less than eight months before the election. The 13 running for reelection (former presidential primary candidate Marco Rubio isn’t defending his seat) campaigned against the ACA in their inaugural Senate campaigns and will oppose it again this time around against Democrat opponents who will rally their political bases around a defense – if not outright expansion – of the ACA. Democrats need to win four (if a Democrat is elected vice president) or five (if a Republican is elected vice president) Republican seats to regain the control of the upper chamber that they lost in 2010.

These political lines in the sand aren’t merely grandstanding, but may well represent the partisan divide within the electorate.

Second, regardless of the outcome of the election, the ACA will change. It must be replaced or overhauled soon – definitely within the two-year term of the next Congress. The ACA, for all its good intentions, is unsustainable. Nongroup insurance markets are collapsing. Twelve of 23 health insurance coops (not-for-profit insurers enabled by the ACA and capitalized by federal taxpayer loans) have failed and the remaining 11 are suffering deep losses. Individuals and families who purchase insurance in the nongroup market have seen their out-of-pocket costs increase dramatically while their networks shrink. Provider unit consolidation has limited consumer choice and increased upward cost pressures as these larger units negotiate contractual terms with insurers.

The solution is complicated by the politics. In other controversial issues that Congress has confronted – think about civil/voting rights and Medicare legislation in the 1960s, for example, or President Reagan’s defense build-up in the 1980s – legislation passed with bipartisan support. Politicians followed the process. Compromises were made. The committees that reconciled Senate and House bills crafted legislation that members of both major parties could support. When shortcomings in the legislation were revealed after the bill became law, both parties had a vested interest in amending the bill so that the program would work as they intended.

Democrats have tried unsuccessfully to correct inconsistencies, unintended consequences and other flaws in the ACA since it passed. Republicans have recognized the flaws but have not come to the table to join in the solution for several reasons. First, as long as the law has no Republican fingerprints on it, GOP politicians feel that they can’t be blamed for the failures. Second, they don’t appear to want to fix the flaws one by one. Instead, they want to use those flaws as leverage to effect major changes in the law. Without that leverage, they lose their ability to force Democrats to the negotiating table to address not only what Democrats consider flaws in the law, but also issues that Republicans see as shortcomings.

This story doesn’t have a clean and happy ending – at least not for a while. The prince and princess don’t live happily ever after. Instead, two political factions at war are likely to continue the political barrage until both sides realize that the system is collapsing and that they’ll both lose if they don’t fix it. That moment – that tipping point in history – is somewhere on the other side of this November’s election.



Want to learn more about actual and current changes to the ACA? Here are some materials:

  • Looking for a good source of objective information about the ACA? Here’s a resource.
  • Did you know that there have been at least 70 changes to the law so far? Grace-Marie Turner lists them for you.
  • Economist John Goodman laid out a vision two years ago of what a true market-oriented health care reform program would look like here.
  • Forbes magazine’s health care columnist, Avik Roy, outlined a plan two years ago to transcend the ACA.



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