Supreme Court Decision What s Next

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1 Supreme Court Decision What s Next June 3, 2015 Provided by Avalere Disclaimer Organizations may not re use material presented at this AMCP webinar for commercial purposes without the written consent of the presenter, the person or organization holding copyright to the material (if applicable), and AMCP. Commercial purposes include but are not limited to symposia, educational programs, and other forms of presentation, whether developed or offered by forprofit or not for profit entities, and that involve funding from for profit firms or a registration fee that is other than nominal. In addition, organizations may not widely redistribute or re use this webinar material without the written consent of the presenter, the person or organization holding copyright to the material (if applicable), and AMCP. This includes large quantity redistribution of the material or storage of the material on electronic systems for other than personal use Academy of Managed Care Pharmacy 1

2 How to Ask A Question Type your question in the Questions area 2015 Academy of Managed Care Pharmacy Supreme Court Decision What s Next? June

3 Agenda King v. Burwell Overview Potential Scenarios Scope of Consumer Impact Healthcare Industry Impact 5 King v. Burwell Overview 3

4 The Supreme Court Will Soon Decide if Consumers in Federal Exchange States Can Receive Subsidies ACA Subsidies The Affordable Care Act includes subsidies intended to lower monthly premiums for those who qualify. Subsidies are only available through exchanges. The law provides that states shall establish exchanges. For states that do not set up an exchange, the law directs the federal government to do so on states behalf. State Exchange Plaintiffs in King v. Burwell argue that the law makes subsidies available only through exchanges established by a state, and that consumers in federallyoperated exchanges are therefore not eligible. In addition to King, several other cases have litigated the issue, including Halbig v. Burwell. Lower Court Rulings In King v. Burwell, the U.S. Court of Appeals for the Fourth Circuit ruled that the federal government may legally provide subsidies for plans purchased though a federally-established marketplace. In Halbig v. Burwell, the U.S. Court of Appeals for the D.C. Circuit ruled such subsidies illegal. Supreme Court In November 2014, the Supreme Court agreed to hear arguments on King v. Burwell. Oral arguments were held on March 4, and a decision is expected in June Source: Patient Protection and Affordable Care Act Health -Related Portions of the Health Care and Education Reconciliation Act of 2010: 7 More than 7.5M Consumers Could be Impacted if the Court Rules for King NUMBER OF ENROLLEES WITH PREMIUM SUBSIDIES WA OR NV CA ID AZ UT MT WY CO NM ND SD NE KS OK MN WI IA IL MO AR IN TN MI KY OH WV SC VT NH NY MA CT RI PA NJ VA NC ME DE MD D.C. NUMBER OF INDIVIDUALS AK HI TX LA MS AL GA FL < 100,000 (15) 100, ,000 (11) 250, ,000 (4) >400,000 (4) SBEs (16 + DC) Source: Health Insurance Marketplace 2015: Average Premiums After Advance Premium Tax Credits Through January 30 in 37 States Using the HealthCare.gov Platform, ASPE Research Brief, released February 9, 2015, available at: SBE: State-based Marketplace 8 4

5 Notable Oral Arguments Focused on Degree of Disruption and Timing of Subsidy Cut-Off ON MARCH 4, THE SUPREME COURT HEARD ORAL ARGUMENTS ON KING V. BURWELL. THE JUSTICES RAISED SEVERAL SIGNIFICANT ISSUES WITH THE CASE, WHICH ARE HIGHLIGHTED BELOW: Degree of Market Disruption Several Justices made reference to the degree of market disruption that ending subsidies may cause. Notably, Justices specifically referenced a death spiral scenario if subsides halted in all FFM states. Subsidies Flowing Through End of 2015 Plan Year Justice Samuel Alito stated that the Supreme Court could reduce the disruptive market impact by staying a decision until the end of 2015 to ensure that customers retained subsidies throughout the plan year. Future Administration Consideration Chief Justice Roberts referenced the Chevron doctrine, which states that if a statute is ambiguous, the court can defer to the agency in charge of implementation for interpretation of the statute. Roberts stated that in effect, a subsequent administration may change the interpretation of the statute. FFM: Federally-facilitated Marketplace Source: Supreme Court Oral Arguments in King v. Burwell, March 4, 2015, accessed via: 9 Potential Ruling Scenarios and Impact 5

6 There Are at Least Three Possible Supreme Court Decision Scenarios Possible Supreme Court Scenarios: Subsidies Are Legal in Federal Marketplace States Subsidies Are Illegal Court Leaves Flexibility for Regulatory Action Subsidies Are Illegal Court Leaves Little to No Flexibility for Regulatory Action Status Quo Administration to Pursue Regulatory Options; Congress Could Act Congress Likely to Consider Potential Solutions 11 The Administration May Have Authority to Pursue Work Arounds, Depending on the Ruling Issue guidance allowing states to easily declare themselves state exchanges, including perhaps allowing states to designate the FFM as their exchange. Allow new state exchanges to leverage HealthCare.gov and other federal infrastructure either under current arrangement or by renting tools for a nominal fee. Attempt to identify new sources of funding to assist states in transitioning to state-run status. Declare exchanges state-based, unless the state indicates otherwise. Even with Administrative Action, Key Questions Remain Will states need to act proactively? How quickly can the transition occur? Can CMS find funds to support exchanges, with Republicans holding power over appropriations? Can states act in time to avoid gaps in coverage? Source: National Council of State Legislatures, State Legislation and Actions Opting-out or Opposing Certain Health Reforms, July , accessed via: 6

7 The Majority of FFM States Are Controlled by Republicans POLITICAL COMPOSITION OF FFM STATES WA OR NV CA AK ID AZ UT MT WY CO NM ND SD NE* KS OK TX MN WI IA IL MO AR MS LA IN TN KY AL MI OH GA WV SC VT NH NY MA CT RI PA NJ VA NC ME DE MD D.C. Republican Controlled (21) Democrat Controlled (1) Split Gov. & Legislature (12) SBEs (16 + DC) HI FL *NE has a unicameral legislature and a Republican Governor. Source: 2014 State and Legislative Partisan Composition, National Conference of State Legislatures, December 2, 2014, available at: FFM: Federally-facilitated Marketplace SBE: State-based exchange 13 States Establishing Exchanges Have a Variety of Operational Options Under the Law Contracting for Exchange Functions Joining Existing Exchanges Creating a Multi-State Exchange Each of these solutions would require significant investments of time and money, which may be obstacles. If a solution that leverages the federal exchange infrastructure can be identified, this may lessen the fiscal and human capital commitment required from states. 14 7

8 Congressional Republicans are Beginning to Pursue a Two-Pronged Solution if Subsidies Are Deemed Illegal Short-Term Patch Republicans are not currently coalesced around a long term solution to replace the ACA, and therefore they may compromise on a short-term solution in order to prevent a loss in coverage. Long-Term ACA Replacement Plan Senate and House Republican leaders are currently devising longer term replacements for the ACA that would involve scaling back and repealing many ACA provisions. Importantly, the Budget Resolution includes reconciliation instructions that could provide a vehicle for post-scotus action. 15 If the Supreme Court Rules Subsidies Illegal, It Is Unclear on What Date Consumers Will Be Impacted PROJECTED TIMELINE FOLLOWING RULING Oral Arguments on King v. Burwell Expected Ruling in Late June Supreme Court Rulings Generally Take Effect After 25 Days, Unless the Court Specifies Otherwise Most FFM Enrollees Would Likely Pay July Premiums with Financial Assistance, but Would Likely not Receive Subsidies in August* March 4, 2015 June 2015 July 2015 August 2015 Carriers are permitted to exit the market if subsidies are no longer available. The 90-day grace period available to consumers receiving subsidies would likely no longer apply. Source: King v. Burwell, November 7, 2014, accessed via: *Carriers typically receive tax credit payments toward the end of the month

9 Many Exchange Consumers Would Find Exchange Coverage Unaffordable without Subsidies WA OR NV CA AK ID AZ PROJECTED AVERAGE PREMIUM CONTRIBUTION INCREASE IN FFM STATES UT MT HI WY NM CO ND SD NE TX KS OK MN IA MO AR LA WI IL MS IN TN KY AL MI OH GA WV SC VT NH NY MA CT RI PA NJ FL VA NC ME DE MD D.C. AVG. % PREMIUM CONTRIBUTION INCREASE < 200% (13) 200%-300% (12) 300%-400% (7) >400% (2) SBEs (16 + DC) Note: The data analysis in this map reflects premium increases due to a loss of subsidies in the 2015 exchange market; therefore, this map does not reflect what future market premiums would be without the subsidies once carriers have adjusted for the loss of financial assistance. Source: Health Insurance Marketplace 2015: Average Premiums After Advance Premium Tax Credits Through January 30 in 37 States Using the HealthCare.gov Platform, ASPE Research Brief, released February 9, 2015, available at: FFM: Federally-facilitated Marketplace SBE: State-based Exchange 17 If Subsidies End for Some Exchange Enrollees, Industry Impact Would Be Significant Reduction in Coverage Barriers to Access Adverse Selection Administrative Complexity Long-term Uncertainty 18 9

10 Questions How to Ask A Question Type your question in the Questions area 2015 Academy of Managed Care Pharmacy 10

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