King v. Burwell, Options for State and Federal Governments

This spring, the U.S. Supreme Court will hear the case, King vs. Burwell, which challenges the Internal Revenue Service rule allowing federal tax credits for Americans purchasing health plans through both federal and state-operated marketplaces. A Court decision that invalidated tax credits though the 34 federally-facilitated marketplaces (FFM) would have catastrophic implications for state insurance markets and the coverage goals of the Affordable Care Act. After the Supreme Court accepted the case in November, some argued that states with FFMs could simply move to create state-based marketplaces in order to preserve their residents’ tax credits. Establishing a state-based marketplace, however, is a complex task both politically and administratively. Because of this, a ruling in favor of the plaintiffs would almost certainly leave the 34 affected states with large numbers of people no longer able to afford their premiums, and subsequently, deteriorating health insurance markets. Building on work published recently in the New England Journal of Medicine, Nicholas Bagley and David Jones propose to explore the sequence of events that would be immediately triggered by a ruling in favor of the plaintiffs, potential federal and state fixes to preserve the tax credits and the hurdles therein, and what if anything some FFM states are currently doing to prepare. The goal of this project is to inform federal and state policy makers about the immediate implications of a ruling that ends tax credits through the FFMs, provide legal guidance to FFM states about potential fixes, and inform federal policy discussions around this issue both in advance of, and in the wake of, such a ruling in June 2014.