Will states have time to react if the Supreme Court rules against the government in ACA case?

What will states using the federal insurance marketplace do if the Supreme Court rules against the government in King v Burwell? Mike Segar/Reuters

The United States Supreme Court is expected to issue an opinion by the end of this month in King v Burwell. At question is whether people using the federal health insurance market are eligible to receive health insurance subsidies.

Right now, people in the 34 states that use the federal health insurance exchange are eligible for subsidies to help make plans more affordable. But if the court rules against the government, over six million people could lose subsidies. That would make health insurance premiums for middle- and low-income people in states using HealthCare.gov much more expensive. It could even push up premiums for people who do not use the subsidies.

President Obama has pointed out that Congress can fix the situation with a one-sentence bill, which Republicans in Congress have said they will not do. Republicans in Congress are working on a number of plans to temporarily extend subsidies should the court void those that currently exist. And Health and Human Services (HHS) Secretary Sylvia Mathews Burwell has publicly declared that the federal government has no contingency plan in place should it lose the case.

While subsidies for plans offered through the federal exchange, HealthCare.gov, are at stake, subsidies for state-run exchanges are not. So one solution is for states using the federal exchange to simply create their own.

It might sound like a simple fix, but setting up an exchange takes much more than simply establishing a website with insurance plans on it. The process is politically and logistically complex, not to mention expensive. It took the states that already have their own exchanges years to contract with insurance companies, establish call centers and set up websites. And they were able to do so only with the financial assistance of hundreds of millions of federal grant dollars, which are no longer available.

So how are states preparing for the King v Burwell opinion and how quickly can they react if the Supreme Court ends subsidies for the federal exchange?

Some states are going their own way

Right now, 16 states and the District of Columbia have their own exchanges. The other 34 states use HealthCare.gov.

At least 11 states of the 34 that opted to use the federal exchange in lieu of creating a state marketplace have introduced legislation to establish their own insurance exchanges. With a state exchange in place, eligible residents would continue to qualify for financial assistance to purchase Affordable Care Act (ACA)-mandated health insurance even if the Supreme Court rules against the government in King v Burwell. The federal government has approved draft contingency plans to create state-run exchanges for three states – Pennsylvania, Delaware and Arkansas – should the court invalidate the subsidies.

But some of these states are moving in the opposite direction. According to the National Association of State Legislatures, at least 11 other states have introduced bills this session proposing to either eliminate their state marketplace or prohibit establishing a state exchange. In Arizona, for instance, Governor Doug Doucey signed a bill that forbids the state from setting up its own health insurance exchange.

Just how bad is the timing of King v Burwell?

But the states without exchanges today will not have years to come up with a fix. A court decision invalidating the federal subsidies would be effective within 25 days of being issued.

The court could issue a stay, which would delay when the ruling takes effect, but it is not clear how long that would need to be to give states adequate time to react. This is not a question of a few extra days or weeks.

Unfortunately, that is not the only timing problem for states. A decision is expected at the end of June, but the 2015 legislative session closes on or before June 30 2015 in the majority of states. Only eight of the legislatures in the states using the federal exchange have the authority to continue to meet after June 30, let alone to introduce and enact new legislation and put it into operation before the start of the next open enrollment period on November 1 2015.

In the other 26 states, calling a special session – a rare event in any context – is fraught with political complication.

Worse yet, the legislatures in at least four states – Texas, Nevada, Montana and North Dakota – only sit in odd-numbered years. So any legislation creating exchanges in response to Burwell in those states is unlikely to move forward until at least 2017.

Can the governor do it?

If legislatures are out of session, is there any other path forward to create a state exchange? It may be possible for at least some of these states to create an exchange by an executive order from the governor. That means state exchanges could be established promptly and unilaterally, regardless of whether the state legislative session has closed.

Three states – Kentucky, New York and Rhode Island – established their state marketplaces by executive order. But they did so years ago. Using an executive order to create a state exchange might sidestep political or scheduling impediments, but it will not make the actual work of getting an exchange into working order easier.

Can the insurance commissioner do it?

Some states have insurance commissioners with sufficient constitutional and statutory authority to try to establish a state exchange. Indeed, Mississippi insurance commissioner Mike Chaney tried to do exactly that in 2013. Although HHS ultimately rejected Chaney’s exchange application, it was not because he lacked authority to establish a state marketplace. At least nine of the states potentially affected in King v Burwell have independently elected insurance commissioners with this kind of authority.

If the end of June brings a decision to end subsidies on the federal health insurance exchange, state policymakers will be under incredible pressure to respond. Millions of Americans will lose their health insurance, and the market for individual insurance in many states is likely to collapse.

If the federal government cannot or will not step in, it is up the states to find a solution. But that is easier said than done.