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.

Nothing to fear: whistleblower action timeline not suspended during war

Although war can present “‘exceptional opportunities’ for fraud on the United States Government,” the statute of limitations for civil actions, including qui tam actions brought under the False Claims Act (31 USC §3729 et seq.), is not tolled by the Wartime Suspension of Limitations Act (WSLA) (18 U.S.C. §3287). On May 26, 2015, the Supreme Court issued its ruling in Kellogg Brown & Root Services, Inc. v. U.S. ex rel Carter, finding that when the United States is involved in an armed conflict, only criminal charges are suspended by the WSLA. The High Court also interpreted language in the False Claims Act regarding the first-to-file rule.

The Wartime Suspension of Limitations Act

Congress enacted the WSLA in 1942 in order to preserve the options of federal prosecutors to bring criminal charges against perpetrators of fraud against the federal government during wartime until three years after the war was over. Before a 2008 amendment, it provided that the running of any statute of limitations applicable to any offense involving fraud committed against the United States was suspended “while the United States is at war.” In 2008, Section 855 of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (P.L. 110-417) amended the law to apply when Congress has enacted specific authorization for the use of military force, until there is either a presidential proclamation or concurrent resolution of congress declaring that hostilities have ended.

Application to qui tam actions

The case before the Supreme Court involves allegations of fraud by government contractors billing for their work in Iraq. The relator was an employee of one of the contractors; the United States declined to intervene. The contractors raised the statute of limitations as a defense, and the relator argued that the WSLA tolled the statute of limitations. The trial court dismissed the complaint, ruling that the WSLA applied only when the government was a party to the litigation. The Court of Appeals reversed, ruling that the WSLA applied to all matters involving alleged fraud against the United States government.

In addition, it held that the “first to file” rule did not bar the relator’s claims because the earlier lawsuits had been dismissed. Although 31 U.S.C. §3730(b)(5) provides that no party other than the government may sue under the False Claims Act when there already is another action pending on a related claim, the Fourth Circuit ruled that the provision no longer applies if the previous litigation has been dismissed.

The United States Supreme Court granted certiorari on July 1, 2014.

Health care amicus brief

The Pharmaceutical Research and Manufacturers Association (PhRMA), the American Hospital Association (AHA), and the American Medical Association (AMA) joined with the Chamber of Commerce of the United States of America and the Clearing House Association, an organization of banks, to file an amicus curiae brief. The brief raised concerns that business generally, and health care-related businesses in particular, would be unable to plan when the country is involved in military operations. It also contended that the Fourth Circuit’s interpretation of the first-to-file rule allows relators to dismiss and re-file, adding to the uncertainty that potential claims may never die (see Wartime extensions of limitations should not apply to qui tam cases: PhRMA, AHA, AMA, Health Law Daily, September 8, 2014).

Supreme Court

The Supreme Court held that the WSLA applies only to criminal charges, and not to civil claims. Writing for a unanimous Court, Justice Alito noted that the WSLA should be construed narrowly, finding that “the WSLA does not suspend the applicable statute of limitations under either the 1948 or the 2008 version of the statute.” With regard to the first-to-file rule, the Court found no reason not to interpret the term “pending” in the FCA in accordance with its ordinary meaning and affirmed part of the Fourth Circuit’s opinion, holding that “a qui tam suit under the FCA ceases to be ‘pending’ once it is dismissed.” The Court remanded the case to the Fourth Circuit for further proceedings consistent with its opinion.