Many States Will Be Unprepared if Court Weakens Health Law | Healthcare and Technology news | Scoop.it

A Supreme Court ruling this spring could upend health insurance markets in at least 34 states, eliminating the federal subsidies that make coverage affordable for millions of Americans.

State governments, theoretically, have ways to forestall this outcome. But few have taken action. If they wait until the court rules, it may already be too late for a state to get started on an exchange so that it is ready for 2016.

The case, called King v. Burwell, concerns whether subsidies can be given to consumers in every state in the country or only in those that have established their own state marketplaces as part of the Affordable Care Act. So far, more than a dozen states and the District of Columbia have such marketplaces. Should the high court rule that subsidies can be distributed only in states running their own exchanges, markets in the remaining states would be substantially disrupted. Prices for insurance plans would sharply rise. Millions of people would drop their coverage.

A decision in the court case is expected in June; a new marketplace would need to be ready for shoppers in October in order to sell health plans for 2016. If those states want to make sure that subsidies keep flowing to their residents, they can build their own marketplaces. But it won’t be easy.



“Anyone who thinks you can just snap your fingers and you’ve got a state exchange is just wrong,” said Timothy Jost, a law professor at Washington and Lee University, who supports the Affordable Care Act.

Congress could prevent or eliminate a disruptive outcome by changing some language in the Affordable Care Act. That change may be more politically fraught than state-level actions in some parts of the country.

The Obamacare law lays out a series of clear requirements for state exchanges — some political, some operational. None of them are trivial.

The political challenges, for one, are substantial. States would need to endorse an exchange through legislation or executive action, as they have declined to do previously. The Affordable Care Act is so unpopular in some of these states that they have passed legislation explicitly barring the governor from establishing an exchange. And only eight states’ legislatures will even be in session in June when the court is expected to rule, according to David K. Jones, an assistant professor at the Boston University School of Public Health, who has studied the state exchange decision-making process and is a co-author on a recent essay in the New England Journal of Medicine spelling out the difficulties states will face.

Then there are the operational challenges. Every state marketplace needs a staff and the ability carry out a series of core functions, including regulating insurance plans, running a call center and managing a website that can enroll people in insurance coverage. Some of the states relying on the federal government are doing one or two of these functions, in an arrangement known as a partnership exchange, but most are not.

Most states will rely on contractors for major tasks, and state laws tend to require a lengthy process for contract procurement that can run six months or longer. Once contracts are signed, the states still need to hire call center employees, devise policies and build the website and its infrastructure.


Many of the 15 state marketplaces that started up last fall struggled to accomplish all of those things. Several states experienced website crashes and failures. And those early states had had more than three years to approve and design their exchanges.

Daniel Schuyler, a director at Leavitt Partners, a consulting firm that helped several states establish exchanges, estimates that building an exchange today would cost a typical state $40 million to $60 million and take between a year (if a state expedited its contracting schedule) and 18 months.




That would be faster than most states with their own exchanges managed in recent years, as well as less expensive. Late adopters would have the advantage of accumulated wisdom that the early states didn’t. They also would benefit from software and computer network contractors with more experience building the necessary computer systems. This year, Massachusetts replaced its failed software with an off-the-shelf product from another contractor. But it still needed to be retrofitted to work with the state’s system.

“You can buy an engine off the shelf, and an engine is the most important thing to make a car run,” said Nicholas Bagley, an assistant professor at the University of Michigan Law School, the other author of the New England Journal article.. “But you can’t drive something off the lot with just an engine.”

States waiting until now to act won’t have access to a substantial pot of federal money to help them get off the ground. States that have established exchanges so far sought substantial establishment grants from the federal government. By law, that funding stream expires at the end of the year, and the deadline for the last round of grant applications has already passed. (A few states that have been considering creating an exchange put in for the money.)

By law, all state exchanges must be financially self-supporting next year, which means that any states that start a new one will have to make a substantial initial investment.

“States don’t have any appetite to dip into their own coffers,” said Mr. Schuyler, who said his firm has talked with a few states about the possibility of starting a state exchange.

All of which means that the effect of a court ruling dismantling federal subsidies could be both substantial and lasting in large parts of the country. States will have the power to get subsidies to their residents. But not easily, and not right away.

“This is really going to be much more difficult for states to do quickly than a lot of people think,” Mr. Jones said.