Halbig vs. Burwell: Potential Devastation to Obamacare

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medical_billing_advocate-135Nearly five million Americans receiving health insurance subsidies through Obamacare are in danger of losing their financial assistance and watching their premiums hike to unaffordable heights. Whether this happens to the fullest, doesn’t happen at all or happens on some level in between all depends on the outcome of the Halbig v. Burwell case.

Under Obamacare, if a person’s income falls below a certain level (depending on family size) they qualify for subsidies to help pay their insurance premiums.

Average premiums among those who qualify for subsidies and who are also enrolled through the federal exchange are around $80 per month. Without the subsidies, the average cost leaps to almost $350 – over four times more than with assistance.

The ruling of Halbig v. Burwell has the potential to be disastrous. If subsidies aren’t available to these five million people, then they could be exempt from the individual mandate, and the Affordable Care Act could lose much of its already shaky ground.


State and Federal Exchanges

The Halbig case challenges the interpretation of the wording regarding the availability of these subsidies for consumers enrolled in a healthcare plan through the federal exchange. In the Affordable Care Act, provisions for subsidies exist for individuals enrolling through a state-established exchange.

medical_billing_advocate-64The wording does not specifically say that subsidies are also available to those who enrolled through the federal exchange in the states that opted not to establish their own healthcare exchange.

Whether the result of ambiguity, deceit or wordsmithing, the U.S. Court of Appeals for the D.C. Circuit is on the brink of making a decision on what could be the most detrimental outcome in the history of Obamacare.

The government is stating that, of course, the intended meaning of the words was to include everyone, and they have given strong arguments as to why it should be interpreted as such.

According to lawmakers, when the Affordable Care Act was written, it was done so with the idea that all states would establish and run their own exchanges. Opponents, however, beg to differ and claim they have proof as to why it should be interpreted as the opposite.

Right now, the decision lies on the shoulders of three federal judges, two of whom are on opposing sides of the argument, and Judge Thomas B. Griffith, whose position is unknown.



medical_billing_advocate-55In January, a judge upheld the meaning of the language given by the administration that those enrolled through the federal exchange were not excluded from the law and that the wording “established by the state” meant any exchange regardless of whether it was federally or state run.

Now that the case is being heard by three D.C. Circuit Court judges, the rebuttal given by the IRS is that in the Affordable Care Act, a section that allows the IRS to issue subsidies mentions exchanges nine different times and refers twice to being enrolled in a health plan “through an exchange established by the State under section 1311.”

The law is also said to mean that states that choose not to establish their own exchange will have a “fallback exchange” (the federal exchange) and it is referred to as the same exchange as the state would have established. They move on to say that all Affordable Care Act exchanges are defined as section 1311 exchanges.

Washington & Lee University Law Professor, Timothy Jost, put it in simpler terms when he said that, according to the Affordable Care Act, “All Americans are residents of States that established Exchanges.” He went on to confirm that “all exchanges are exchanges ‘established by the state’ and can issue premium tax credits.”

Jost also added, “There is a school of thought, however, that believes that it does not matter what Congress means; all that matters is the language it uses in a law.  Even judges who believe this, however, look at the law as a whole and do not cherry pick particular phrases to the exclusion of others.”


Pro – Halbig

medical_billing_advocate-37The opposing side claims that it is illegal to tax for and distribute subsidies in the 36 states that opted out of establishing their own exchange. If that’s the case, the billions of dollars taken from the Federal Treasury for these subsidies will have been taken unlawfully and would be a violation of the separation of powers.

Ruling in favor of Halbig could mean a decline in enrollees in Obamacare – immediate or gradual. If over five million people are suddenly exempt from the individual mandate (which could happen if they do not qualify for subsidies) this program will not work as planned, enrollees may scatter, and Obamacare’s main purpose will be spoiled.

This case could be appealed to en banc review (where the case is heard by all D.C. Circuit judges instead of only three) and even all the way up to the Supreme Court. The process could be years in length, so the effects may not be seen immediately.

The 17 states (including D.C.) that have their own exchanges will continue doing business as usual. As for the other 36 states, it is uncertain what would happen quite yet.

Some speculate exchanges would disappear, and others, like Duke University’s Don Taylor believe more states would actually pass a law agreeing to partner with the federal exchange in order to use it as a state exchange.

Taylor said that because of hesitance during the initial implementation of Obamacare, many states didn’t jump to establish their own exchanges, but he does believe that these states will choose establishing an exchange over losing subsidies for their residents.

States that do not will surely have to get creative as to how they will help the masses that suddenly become uninsured, many of whom just started receiving insurance.


Insurance Companies

If the former happens, and people flee from the program, insurance companies will no doubt reassess their participation in the exchanges.

The insurance companies that do stay may have to adjust pricing according to the new numbers, meaning that the consumers who are paying full price could take a steeper hit than they originally bargained for.

Since 87 percent of consumers who bought a health plan on an exchange received a subsidy, one can only imagine the number of people who will become completely unable to continue paying if they are found to be illegal.

Timothy Jost is confident, though, and has said that there is “not a shred of evidence that Congress meant to limit tax credits to state-operated exchanges.” He went on to say that Obamacare facts and history clearly made efforts to “establish that both federally facilitated and state-operated exchanges are authorized to issue premium tax credits.”

So far, courts have ruled that the meaning of the language used is unambiguous. If Obamacare is to remain as it is, the court must agree that Congress requested every state to establish an exchange with the understanding that they can’t force them to do so.

Also, they must believe that Congress provided a fallback exchange for the states that decided to opt out of establishing their own exchange, and this fallback exchange would have all the power and capability of state exchange, including providing subsidies.

But while the case is hashed out in court, somewhere between the mudslinging and the politics, we must not lose sight of the fact that there are nearly five million Americans, some of whom were just recently able to secure coverage, who could lose their subsidies and possibly their health insurance.

If Halbig wins this case, consumers can only hope there will be a quick solution to follow.


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