Possible Changes Coming to Premium Subsidies, Individual Mandate

Two major developments have recently occurred that may significantly affect the roll-out and final shape of the health care reform law. On Tuesday, October 22nd, a federal judge refused to dismiss a lawsuit that is critical to the future of the Affordable Care Act's (ACA) premium subsidies program. The plaintiffs who filed the suit claim that the ACA does not authorize premium subsidies to be awarded to individuals residing in states where the federal government is running the new health insurance exchange. If they succeed, it could cripple the ACA’s future, which relies heavily on eligible individuals in all fifty states receiving subsidies for insurance coverage purchased through an exchange. The statutory provision in question appears to limit subsidy eligibility to individuals residing in states that run their own exchange.  This alone, plaintiffs argue, should dictate the outcome of the case. The federal government, however, has argued that the provision should be read in the context of the entire statute; it would make no sense, the government argues, for Congress to draft the statute in a manner that does not permit individuals in states with federally-run exchanges from receiving subsidies.  

The judge’s decision on October 22nd refused to dismiss the case on standing grounds, finding that four individual plaintiffs were within the “zone of interest” that entitled them to bring the case.  At the same time, the judge refused to prevent the subsidies from being awarded until he issues a ruling.  Instead, he said he can rule on the merits of the case by February 15, 2014 (the current effective date for the individual mandate).  The Judge said he will consider the case on an expedited schedule in order to meet that deadline.

In a separate development, on the evening of Wednesday, October 23rd, the Administration announced that it would be "delaying" the ACA individual mandate by at least six weeks. Under previous guidance, the Administration indicated that individuals would be required to enroll in a health plan by February 15th, 2014 to meet the March 31st coverage deadline to avoid a penalty, as there is a delay with processing the application and beginning coverage. This most recent announcement seeks to align those two dates, most likely making March 31st the final application date for enrollment as well. It is thought the Administration is taking this step to alleviate confusion over two dates, but also possibly buy themselves potentially another six weeks to allow further repairs to the widely-inaccessible healthcare.gov exchange site. Written guidance is forthcoming, so certain details about the delay are unclear, like if waivers will be issued for those applying after February 15th.

Next Steps: The review of the premium subsidies, and also the need to delay the individual mandate and the inaccessibility of the exchanges, has reinforced the idea that the law is very much in need of repair to function in a way that won't harm consumers or the insurance industry. Most notably, the unavailability of premium subsidies outside of exchanges has placed consumers, especially the most needy, in a predicament. NAIFA President, John Nichols, recently stated, "Those hurt most by the glitches are the most needy. Individuals who aren't eligible for subsidies can easily obtain coverage outside the exchanges on the existing market, which isn't filled with glitches and delays. Unfortunately, lower income Americans can only use their subsidies for coverage purchased inside the exchanges. This is one of the reasons NAIFA argued that the subsidies should be available both inside and outside the exchanges."

As events unfold, such as the mandate delay, the subsidy review, and the continued exchange inaccessibility, NAIFA will look for opportunities to make subsidies available for consumer outside of the exchanges, as well as advocate for other necessary changes.