Marriage equality reduces the number of uninsured: JAMA study

A significant number of people in same-sex relationships gained employer-sponsored insurance (ESI) coverage as a result of the implementation of the New York Marriage Equality Act, according to an article published in the Journal of the American Medical Association (JAMA) on June 26, 2015. There also was a small reduction in the number of individuals on Medicaid. Based on these findings, the author anticipates that the Supreme Court decision in Obergefell v. Hodges mandating marriage equality will reduce the number of uninsured nationwide.

Methodology

The author, Gilbert Gonzales of the University of Minnesota School of Health, Division of Health Policy and Management, used data from the American Community Survey, an annual mail survey conducted by the U.S. Census Bureau. Same-sex couples were identified when the primary respondent to the survey indicated that his or her spouse or domestic partner was a person of the same sex. He compared the rate of ESI coverage among same-sex couples to that of opposite-sex married couples in New York from 2008 through 2010, before enactment of the statute, to coverage in 2012. New York began to issue marriage licenses to same sex-couples on July 24, 2011.

The respondent for each household identified the source of insurance coverage for each member of the household. The responses were sorted into Medicare, coverage through a current or former employer, TRICARE or other military health care, coverage purchased directly from the insurance company, Medicaid, and uninsured.

Insurance trends in general

Before enactment of the law, rates of coverage were dropping slowly for both groups. In 2012, there was a 6.3 percent increase in ESI among men in same-sex relationships, while Medicaid coverage dropped 2.2 percent. Among women in same-sex relationships, there was an 8.9 percent rise in ESI and a 3.9 percent drop in Medicaid enrollment. The trends in rates of ESI coverage among opposite-sex couples did not change.

SCOTUS rules in favor of ACA subsidies for federal Exchange enrollees

In a six to three decision, the U.S. Supreme Court has affirmed the Fourth Circuit and upheld an Internal Revenue Service (IRS) ruling to extend health plan premium tax credits to individuals enrolled in Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) coverage through a federal Health Insurance Exchange (Exchange). Chief Justice John Roberts, writing for the majority, and joined by Justices Kennedy, Ginsburg, Breyer, Sotomayor, and Kagan, found that the ACA phrase “an Exchange established by the state” did not expressly limit tax credits to state Exchanges, as alleged by the petitioners, but was properly viewed as ambiguous and that several other provisions in the ACA would make little sense if tax credits were not available to federal Exchange enrollees (King v. Burwell, June 25, 2015, Roberts, J.).

According to Roberts, “the fundamental cannon of statutory construction [is] that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.” Reading the words in the context of the ACA’s statutory scheme, Roberts wrote that the majority was compelled “to reject the petitioners’ [limited] interpretation because it would destabilize the individual insurance market in any State with a Federal Exchange, and likely create the very ‘death spirals’ that Congress designed the Act to avoid.”

Roberts granted that the petitioners’ arguments regarding the plain meaning reading of the language “an Exchange established by the state” were strong when viewed alone, however, “the context and structure of the ACA compelled [the Court] to depart from what would otherwise be the most natural reading of the pertinent statutory phrase.”

Justice Scalia, joined by Justices Alito and Thomas, wrote a scathing dissent claiming the majority changed the rules regarding statutory interpretation to save the ACA.

Background

The ACA’s subsidy provisions are the key instrument through which the Act makes coverage affordable to individuals who purchase insurance on an Exchange. The ACA provides for advance payment of premium tax credits for people with incomes between 100 and 400 percent of the federal poverty level (FPL, $11,770-$47,080 for an individual in 2015) and cost-sharing reductions for people with incomes from 100 to 250 percent of the FPL ($11,770-$29,425 per year for an individual in 2015). To illustrate the importance of the subsidy provisions, according to an HHS Assistant Secretary for Planning and Evaluation (ASPE) Issue Brief, in 2015, 87 percent of people who selected a plan in states with a federal Exchange received premium tax credits.

Section 1311 of the ACA is the provision that allows states to set up Exchanges and section 1321 requires the Secretary of HHS to set up federal Exchanges in states that fail to set up Exchanges. Under section 1401 of the ACA, individuals are offered premium assistance through tax credits if they meet certain requirements, including enrollment “through an Exchange established by the State under section 1311.”

Despite the plain language of section 1401, the IRS began issuing tax credits through both federal and state Exchanges in January 2014 (26 C.F.R. Sec. 1.36B-1(k); 77 FR 30377, May 23, 2012) (the “IRS Rule”). The IRS Rule provides that the credits will be available to anyone “enrolled in one or more qualified health plans through an Exchange,” and then adopts by cross-reference an HHS definition of “Exchange” that includes any Exchange, “regardless of whether the Exchange is established and operated by a State…or by HHS” (26 C.F.R. Sec. 1.36B-2; 45 C.F.R. Sec. 155.20).

The petitioners in Kingv. Burwell are Virginia residents who do not want to purchase comprehensive health insurance. Because Virginia has declined to establish a state Exchange, it is served by a federal Exchange. The petitioners claimed that the cost of the least expensive unsubsidized Exchange plan through the federal Exchange would exceed 8 percent of their 2014 income, making them exempt from the ACA tax for failing to comply with the individual mandate. However, if the IRS Rule was correct and premium tax credits were applicable to federal Exchanges, the reduced costs of the policies available to the petitioners would subject them to the minimum coverage penalty. Therefore, if Court upheld the IRS Rule, the petitioners contended they would incur some financial cost because they would be forced to either purchase insurance or pay the individual mandate penalty. The petitioners alleged that the ACA’s statutory language precluded the IRS’s interpretation that the premium tax credits are also available to federal Exchanges.

It was correctly thought that this case would turn on the ACA language that ties the amount of tax credits to a health plan purchased “through an Exchange established by the State.” The petitioners argued that this language is unambiguous and clearly means that persons who purchased their health insurance plan through a federal Exchange do not qualify for tax credits. The government disagreed with the petitioners’ interpretation of the language, arguing that even if the language is unambiguous, the IRS ruling to extend the tax credits to federal Exchange enrollees was reasonable and entitled to deference.

Court Rulings Below

On February 18, 2014, the U.S. District Court for the Eastern District of Virginia dismissed the petitioner’s complaint, finding that the IRS Rule was a permissible exercise of administrative discretion because the ACA as a whole clearly evinced Congress’s intent to make the tax credits available in both state and federal Exchanges (see Subsidies for health coverage through Exchanges within authority of IRS, Health Reform WK-EDGE, February 26, 2014).

On July 22, 2014, a three-judge panel of the Fourth Circuit unanimously affirmed the district court’s ruling that the IRS Rule was a permissible exercise of administrative discretion, finding that the applicable statutory language was ambiguous and subject to multiple interpretations (see Appellate court creates circuit split by upholding IRS Rule, Health Reform WK-EDGE, July 22, 2014).

That same day, however, in Halbig v. Burwell, the U.S. Court of Appeals for the District of Columbia Circuit reached the opposite conclusion, with its three-judge panel ruling 2-1 that the IRS did not have the authority to rewrite the wording of the ACA to suit its intent to allow federal Exchange subsidies (see Federal appeals court axes subsidies for federally-run Health Insurance Exchanges, Health Reform WK-EDGE, July 22, 2014).

The White House then filed a motion for rehearing of the Halbig ruling before a full panel of the D.C. Circuit, which has seven judges appointed by Democratic presidents and four appointed by Republicans (see Halbig panel was wrong; Government seeks rehearing to avoid ‘perverse consequences’, Health Reform WK-EDGE, August 6, 2014). The plaintiffs in Halbig opposed the government’s motion for rehearing by the full D.C. Circuit, claiming that the plaintiffs in King v. Burwell had already petitioned the Supreme Court for review in that factually related case (see Halbig team asks to skip straight to SCOTUS, Health Reform WK-EDGE, August 20, 2014).

The D.C. Circuit granted the government’s motion for a rehearing of the Halbig appeal by the full panel of judges (see Halbig decision on premium subsidies to be reheard by full D.C. Circuit, Health Reform WK-EDGE, September 10, 2014); however, after the Supreme Court agreed to hear King v. Burwell, the D.C. Circuit ordered that Halbig be removed from the oral argument calendar and held in abeyance pending the Supreme Court’s decision in King v. Burwell (see Federal court waits for SCOTUS to rule on health insurance subsidy, Health Reform WK-EDGE, November 19, 2014).

Supreme Court Briefs and Oral Arguments

In their Supreme Court brief, the petitioners argued that there is no legitimate way to construe the phrase “an Exchange established by the State under section 1311” to include one “established by HHS under section 1321.” Therefore, because Congress expressly provided tax credits only for state Exchanges, and not federal Exchanges, the petitioners contended that the Court must give effect to that plain meaning of the ACA. The government’s brief countered that the ACA text, structure, and history demonstrate that tax credits were meant to be available through both state and federal Exchanges.

On Wednesday, March 4, 2015, the U.S. Supreme Court heard oral arguments in the case. As expected, the Justices’ questioning indicated that the Court was split, with the liberal Justices dominating the questioning during petitioner’s portion of the argument, and the conservative Justices becoming more vocal once the government began its argument (see SCOTUS hears King v. Burwell: Kennedy voices constitutional concerns, Roberts doesn’t tip his hand, Health Reform WK-EDGE, March 5, 2015).

Majority Analysis

In its analysis, the majority recognized that the ACA involves three interlocking reforms in the individual health insurance market: (1) it bars preexisting conditions in determining whether to provide coverage (the guaranteed issue requirement) and in setting the premium (the community rating requirement); (2) it requires each person to maintain insurance coverage or make a payment to the IRS; and (3) it gives tax credits to certain people to make insurance more affordable.

In addition to the three interlocking reforms, the ACA required the creation of Exchanges by the states or by federal government if the states declined to do so. If the states declined, the ACA ordered HHS to establish “such Exchange.” According to the majority, the use of the words “such Exchange” indicated that the state and federal Exchanges should be treated the same and that would include the availability of premium tax credits. To rule otherwise would fly in the face of several other ACA provisions, such as the requirement that all Exchanges “distribute fair and impartial information concerning…the availability of premium tax credits.” This provision would not make sense, according to the majority, “if tax credits were not available on Federal Exchanges.”

The majority ultimately decided that the phrase “an Exchange established by the state” was ambiguous. They attributed the ambiguity to Congress (1) writing key parts of the ACA behind closed doors; and (2) passing much of the ACA through the reconciliation process, which limited opportunities for debate and amendment and bypassed the Senate’s normal 60-vote filibuster requirement.

Bearing in mind that statutes must be read in their context and with a view toward the overall statutory scheme, the majority rejected the petitioners’ plain meaning construct because it would destabilize the individual market and likely create “death spirals.” The majority determined that under the petitioners’ reading, the ACA’s three interlocking reforms, particularly the tax credit and coverage reforms, would not work in a meaningful way. The majority noted several studies, including one that predicted that premiums could increase 47 percent and enrollment could decrease by 70 percent. “It is implausible that Congress meant the Act to operate in this manner,” the majority decided.

Roberts concluded by reminding us that “[i]n a democracy, the power to make the law rests with those chosen by the people…A fair reading of legislation demands a fair understanding of the legislative plan. Congress passed the [ACA] to improve health insurance markets, not to destroy them. If at all possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter.”

Dissenting Opinion

In his dissent, Justice Scalia argued that “[u]nder all the usual rules of interpretation…the Government should lose this case. But normal rules of interpretation seem always to yield to the overriding principle of the present Court: The Affordable Care Act must be saved.”

Scalia offered up numerous sections of the ACA that sharply distinguish between the establishment of an Exchange by a state and the federal government and thereby undermine the majority’s interpretation. He also offered seven provisions that refer to the establishment of Exchanges by the states, which he claimed would be nullified by the majority interpretation.

Scalia also attacked the majority claim that the phrase “such Exchange” implies that federal and state Exchanges are same. To highlight what he saw as the majority’s error, Scalia offered Article I, Section 4, Clause 1 of the U.S. Constitution, which states:

The Times, Places and Manner of holding Elections for Senators and Representatives, shall be prescribed in each State by the Legislature thereof; but the Congress may at any time by Law make or alter such Regulations.

According to Scalia, “[j]ust as the [ACA] directs States to establish Exchanges while allowing the Secretary to establish ‘such Exchange’ as a fallback, the Elections Clause directs state legislatures to prescribe election regulations while allowing Congress to make ‘such Regulations’ as a fallback.” Scalia asks “[w]ould anybody refer to an election regulation made by Congress as a ‘regulation prescribed by the state legislature’? Would anybody say that a federal election law and a state election law are in all respects equivalent? Of course not. The word ‘such’ does not help the Court one whit.”

Scalia suggested that “[r]ather than rewriting the law under the pretense of interpreting it, the Court should have left it to Congress to decide what to do about the Act’s limitation of tax credits to state Exchanges.” According to Scalia, the majority opinion changes the rules of statutory interpretation for the sake of the ACA, and thereby “aggrandizes judicial power and encourages congressional lassitude.”

All eligible Americans receive premium subsidies, Obama Administration’s interpretation of ACA stands

The Supreme Court issued a 6-3 ruling in King v. Burwell, holding that Section 36B of the IRS Code’s tax credits are available to individuals in states that have a federal Health Insurance Exchange. The Court determined that, based on the broader structure of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), Congress did not intend to limit tax credits to state Exchanges. Chief Justice Roberts wrote the majority opinion, joined by Justices Kennedy, Ginsburg, Breyer, Sotomayor, and Kagan; Justice Scalia dissented, joined by Justices Thomas and Alito.

At issue is the legality of an IRS regulation extending tax credits to people who purchased health insurance plans from the federal Exchanges set up in the 34 states that refused to set up state Exchanges authorized by the ACA. The ACA’s subsidy provisions are the key instrument through which the Act makes coverage affordable to individuals who purchase insurance on an Exchange. The ACA provides for advance payment of premium tax credits for people with incomes between 100 and 400 percent of the federal poverty level.

Section 1311 of the ACA allows states to set up Health Insurance Exchanges, and section 1321 requires the HHS Secretary to set up federal Exchanges in states that fail to set up Exchanges. Under section 1401 of the ACA, individuals are offered premium assistance through tax credits if they meet certain requirements, including enrollment “through an Exchange established by the State under section 1311.”

The IRS began issuing tax credits through both federal and state Exchanges in January 2014 (26 C.F.R. Sec. 1.36B-1(k); 77 FR 30377, May 23, 2012) (the “IRS Rule”). The IRS Rule provides that the credits shall be available to anyone “enrolled in one or more qualified health plans through an Exchange,” and then adopts by cross-reference an HHS definition of “Exchange” that includes any Exchange, “regardless of whether the Exchange is established and operated by a State…or by HHS” (26 C.F.R. Sec. 1.36B-2; 45 C.F.R. Sec. 155.20).

The petitioners in King v. Burwell are residents of Virginia—which declined to establish a state Exchange—who do not want to purchase comprehensive health insurance. On February 18, 2014, the district court dismissed the petitioners’ complaint, finding that the IRS Rule was a permissible exercise of administrative discretion because the ACA as a whole clearly evinced Congress’s intent to make the tax credits available in both state and federal Exchanges (see Subsidies for health coverage through Exchanges within authority of IRS, Health Reform WK-EDGE, February 26, 2014).

On July 22, 2014, a three-judge panel of the Fourth Circuit unanimously affirmed the district court’s ruling that the IRS Rule was a permissible exercise of administrative discretion, finding that the applicable statutory language was ambiguous and subject to multiple interpretations (see Appellate court creates circuit split by upholding IRS Rule, Health Reform WK-EDGE, July 22, 2014).

For a full history of the case, please click here.

In-depth analysis of this case will be posted early next week.

Mandate withstands religious challenge, providing contraceptives has ‘nothing to do with it’

The Fifth Circuit held that the EBSA Form 700 accommodation to the contraceptive mandate under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) did not violate the Religious Freedom Restoration Act (RFRA) (42 U.S.C. § 2000bb) because it did not require religious organizations to provide or facilitate access to contraceptives. The court held that several religious organizations, who did not qualify for the ACA’s religious exemption, were not burdened by the accommodation because the accommodation only imposed burdens on third parties and the RFRA provided no opportunity for religious organizations to challenge the independent conduct of third parties (East Texas Baptist University v. Burwell, June 22, 2015, Smith, J.).

Mandate

Under the ACA, employers with fifty or more full time employees must offer a health plan for employees that includes “minimum essential coverage.” As part of this, plans typically are required to cover all FDA-approved contraceptive methods without copayments or deductibles. Religious employers—those that are defined as religious under the tax code—are automatically exempted from this requirement. The penalties for noncompliance are significant, “$2,000 per full-time employee per year for not offering a plan at all and $100 per affected individual per day for offering a plan that provides insufficient coverage.”

Accommodation

An accommodation is available to religious entities that do not qualify as religious employers but seek an exemption from the mandate. Those organizations can either execute an EBSA Form 700, certifying that it is a nonprofit entity holding itself out as a religious organization and that it opposed the provision of contraceptive services, or notify HHS in writing with the name of the organization, the nature of the objection, and certain plan information.

ESBA Form 700

East Texas Baptist University, Houston Baptist University, Westminster Theological Seminary, University of Dallas, the Catholic Diocese of Beaumont, Catholic Charities Diocese of Fort Worth, and the Catholic Charities of Southeast Texas Incorporated opposed the ACA mandate on religious grounds because they oppose abortion and believe that emergency contraceptives and intrauterine devices, which are included in the contraceptive mandate, can cause abortions. Some of the organizations, including East Texas Baptist did not meet the ACA’s religious employer exception. The religious organizations filed suit in several district courts within the Fifth Circuit’s jurisdiction seeking an injunction to halt the requirements of the contraceptive mandate and accommodation. In each of the lawsuits filed by the organizations, either a preliminary or permanent injunction was granted by a district court in favor of the religious objections.

Burden test

The Fifth Circuit evaluated whether the injunctions were appropriately granted by considering the ACA mandate and accommodation in light of the RFRA. The court began and ended its analysis by holding that the religious employers did not establish that the mandate or the accommodations substantially burdened their religious exercise or that they could make such a showing. The court reasoned that the question of a substantial burden on religious exercise was composed of three questions: (1) what is the adherent’s religious exercise, (2) does the challenged law pressure him to modify that exercise, and (3) is the penalty for noncompliance substantial? The court accepted at the outset that the beliefs were sincerely held and religious.

Precedent

The court relied on Supreme Court precedent (Bowen v. Roy, S.Ct., January 14, 1986) to highlight the fact that “the Free Exercise Clause simply cannot be understood to require the Government to conduct its own internal affairs in ways that comport with the religious beliefs of particular citizens.” As a result, the court reasoned that the relevant analysis was whether “the challenged law pressures the objector to modify his religious exercise.” Notably, the court found that the Supreme Court’s decision in n Burwell v. Hobby Lobby Stores, Inc. (Hobby Lobby), where the court held that the mandate violated the RFRA with respect to corporations that were neither automatically exempt from the mandate as religious employers nor eligible for the accommodation, was not instructive because the Hobby Lobby Court did not address the second question of the substantial burden analysis.

Nothing to do with it

The court ultimately found that although the religious employers were able to identify acts that offended their religious views, the court held that the RFRA was not implicated because, due to the accommodation, the objectionable acts were acts performed by third parties and not the religious organizations themselves. The court simply held that the RFRA “confers no right to challenge the independent conduct of third parties.” The Fifth Circuit rejected the argument that by taking part in the accommodation process the organizations were somehow triggering payment or authorization of contraceptives. The court held that the triggering argument was not persuasive because the insurers or third-party administers who become responsible for the administration of the contraceptive benefits under the health plan are required by law to provide those services anyway. The court succinctly dismissed the organizations’ challenges by saying the accommodation challenged by the religious organizations “has nothing to do with providing contraceptives.”

Ripe

The court rejected an additional argument from the religious employers that “third-party administrators will attempt to charge them for contraceptives.” The court identified that the employers’ concerns may not come to pass and, as such, rendered the issue not fit for judicial decision. The court also rejected arguments from two of the organizations who qualified as religious employers and were exempt from the mandate because the court found that the accommodation in no way burdened the religious exercise of those exempt organizations.