As discussed last week the current Supreme Court of the United States (SCOTUS) challenge to the Affordable Care Act (ACA aka Obamacare) centers on what has now become known as those four little words: enacted by the state. The center of the case essentially says that if the plaintiffs prevail, no subsidies will be allowed for individuals in the federal marketplace.
This is not a big deal to California, as we have our own Exchange. But Anthem Blue Cross, one of the biggest players in the Exchange is owned by Wellpoint, a nationwide conglomerate of insurance companies. So the impact of the disruptions would surely impact even those states that have an Exchange. Further, there are many millions of people who have relied on these subsidies to be able to afford health coverage.
There are many questions about how this will proceed. First understand that the Court is not likely to release their final decision until the end of the term in June. Some say they do this with the most controversial decisions so they can skip town to get away from public scrutiny. It’s a little bit like firing someone on Friday. You get a break for things to settle down.
Should they find in favor of the plaintiffs there are still multiple ways this could be handled. Of course the easiest would be for Congress to make a simple correction to the law. But since it is doubtful that this Congress could agree that the earth is round, that is unlikely.
The court could make the decision effective immediately, thereby throwing the whole individual market into instant chaos. Or they would delay it until the decision is certified. That would give the market about 28 days to come up with a solution and implement it. Another U turn for the huge ship I have been talking about. We know how easy those are!!
They might consider leaving subsidies in place for the rest of the tax year or some other extended time frame. But it takes more than 6 months to get a new state Exchange up and running.
Another option would be that they could decide that the plaintiffs do not really have standing and are not unquestionably impacted by the subsidies. In fact when reading the transcript it seemed clear that two of the four plaintiffs do not at this time.
The only word out in the industry is that carriers would have an “opt-out” clause in their contracts if the subsidies go away. But there are other rules governing carriers and market exit, so it’s not that simple.
Here’s a little more food for thought. What if they not only simply fixed the Federal and State Exchange issue, but also allowed individuals to obtain the Premium Tax Credit on their returns regardless of whether they purchased through the Exchange or not. I am referring to only those who purchase individual insurance under the same restrictions of income qualification that exist under the ACA. .
An individual could forgo the Advance Premium Tax credit, pay the full premium and buy an ACA qualified plan direct from any insurer, then reconcile at tax time. This would unburden the Exchange from all those self-employed people who really don’t know if they qualify and are guessing at income.
I have several clients, most self-employed, that contact me regularly in a state of great anxiety as their income fluctuates. They want to know “how much can I make and still pay this premium?”
I recently had a CPA tell me she could not even open a new client file for less than $250. It’s no wonder many agents are leaving the subsidized insurance market. Adding income tax consultation, Covered CA software help and the like are all above and beyond the typical insurance transaction. This has made it increasingly unprofitable to the agent to handle this type of business.
Yet, if an agent works in the small group market (soon to be less than 100 employees) I believe it’s impossible to adequately serve the group if you do not have a solid working knowledge of how this process works.
Margaret Beck CLU, ChFC, CEBS started her insurance practice in Redding in 1978. As an insurance broker/consultant, she represents businesses and individuals as their advocate. She assists in choosing proper products, compliance with complex benefit laws and claims issues once coverage is placed. All information in her column is provided to the best of her knowledge, subject to final regulation by the respective agencies.
Questions to be answered in this column can be submitted to info@insuranceredding.com.
Beck’s column is also published in the Redding Record Searchlight.
