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If Health Insurance Subsidies Are Struck Down, States Will Need Time

This was published as a Wall Street Journal Think Tank column on March 4, 2015.

In op-eds published in The Wall Street Journal and the Washington Post this week, Republicans sketched out fallback positions, suggesting actions that Congress could take if the Supreme Court rules for the plaintiffs challenging the legality of health insurance subsidies in states with federally run marketplaces. But the odds are very low that Democrats and Republicans in Congress and President Barack Obama could agree on any health-care legislation, much less come to consensus on what Senate Majority Leader Mitch McConnell has called a“mulligan” and a “do-over” for the Affordable Care Act. If the court rules for the plaintiffs in King v. Burwell, action is not likely to come from Congress but in the 34 states where about 7.5 million people would lose insurance subsidies.

Current guestimates are that six red states would consider setting up their own insurance exchange, enabling their eligible residents to continue to qualify for financial assistance to help them buy insurance. Add to that Pennsylvania, where newly elected Democratic Gov. Tom Wolf has said that he will set up an exchange. It’s impossible to know how many of the 34 states would want to act until subsidies are struck down and it becomes clear how much political pressure is weighing on governors and legislatures. A key factor that has not received enough attention is whether state officials will have time to let their politics play out and take the steps needed to set up their own marketplace if they choose to do it.

It takes time to establish eligibility and enrollment systems and governanace structures, to contract with health plans, and to do outreach. In some cases governors may be able to use executive authority, but in most states both governors and legislatures will need to act to set up a state insurance exchange. Some states might be able to use HealthCare.gov for eligibility and enrollment functions while still qualifying as a state-run exchange–Oregon, Nevada, and New Mexico have done this–but that too takes time to arrange.

Legal experts have predicted that a ruling for the plaintiffs would take effect quickly, with people losing financial assistance within 25 days. A grace period lasting through 2016 would give interested states time to set up marketplaces and start enrolling people for 2017. But would Republicans want to give states–and people receiving financial assistance for health coverage–the time?

Republicans would, no doubt, not be of one mind on a grace period. Some would oppose a grace period for states in an effort to do maximum damage to Obamacare, or they might favor sequential extensions not too different from what has just happened with Department of Homeland Security funding, which would keep Obamacare in the headlines as a political target. Others could view a grace period for action as a way to give Republicans in Congress time to work out details of their “do over” of the ACA without owning the problem of cutting off financial assistance for millions of people, or time to talk to voters about health-reform ideas ahead of the 2016 elections. In any event, it’s unlikely that Democrats and Republicans in Congress and the president could agree on broader ACA legislation. The Supreme Court itself could grant a grace period, but legal experts I have talked to say that is unlikely, so the next steps would be up to Republicans who control Congress.

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Filling the need for trusted information on national health issues, the Kaiser Family Foundation is a nonprofit organization based in Menlo Park, California.