Guest MINDSETTER™ Blake Filippi: Supreme Court Implications for HealthSource RI
Saturday, February 14, 2015
King’s genesis is an IRS regulation that allows health insurance premium subsidies (ACA subsidies) from the federal government to economically disadvantage persons in all 50 states – regardless of whether there is a state-run or federal insurance exchange.
Several low-income residents of Virginia (the King Plaintiffs) that are entitled to ACA subsidies under the IRS rule soon filed suit. Virginia does not have a state-run exchange. Instead, its citizens utilize a federal exchange.
The crux of the King Plaintiffs’ argument is rooted in an ACA provision stating that subsidies are available to persons “which were enrolled  through an exchange established by the State.” The King Plaintiffs assert that this language limits ACA subsidies to the 14 states that have established a state-run exchange, and that citizens of the 36 states that utilize federal exchanges instead – including Virginia – are not entitled to ACA subsidies. Thus, they conclude, the IRS rule providing ACA subsides in these 36 states is illegal.
The Federal Government
Why is it so critical? On the first level of analysis, the cancellation of ACA subsidies in the 36 states without a state-run exchange would be a significant blow to ACA’s intent to provide subsidized health insurance for the economically disadvantaged.
However, the chain reaction due to the unavailability of ACA subsidies is where things get really interesting.
First, if successful, the King Plaintiffs, and many lower income citizens in the 36 states without state-run exchanges, would become free from the ACA’s individual mandate tax because they “cannot afford coverage” without the ACA subsidies. In other words; no subsidies = no individual mandate taxes for those who cannot afford coverage without subsidies.
Second, and most crucially, the ACA’s large-employer mandate (averaging between $2-3 thousand per employee per year when a business does not provide adequate health insurance) would become inapplicable in the 36 states without a state-run healthcare exchange. Here’s why: the ACA’s large employer mandate tax is imposed against an employer where there is at least one employee to whom the ACA subsidies are “allowed or paid.” If ACA subsidies are unavailable because a state has refused to establish a state-run exchange, the federal large employer mandate tax likely cannot be imposed in that state.
What It Means For Rhode Island
Conversely, if HealthSource RI were eliminated, there would be no more ACA subsidies for many of our economically disadvantaged neighbors. Yet, consequentially, we would also free many low income Rhode Islanders from the ACA’s individual mandate. Our business community would also be relieved from the ACA’s large employer mandate tax – allowing more level competition with the 36 states that don’t have state-run exchanges and are not subject to the large employer mandate tax.
Well, if the King Plaintiffs are successful before the Supreme Court, should we keep HealthSource RI? There is no easy answer, and we may very well soon be tasked with resolving this most difficult issue. Our duty is to keep a watchful eye on the Supreme Court, and to engage in frank discussions about whether continued ACA subsidies are worth the imposition of the ACA mandates on our low-income neighbors and our struggling business community. We owe it to Rhode Island’s future to have these difficult conversations now so that we may respond quickly and thoughtfully if necessary.