Health & Medicine

U.S. Supreme Court ruling won’t stop state’s health exchange

Outside a health care enrollment center in Westminster, an “Uncle Sam” looks for insurance clients. The U.S. Supreme Court is deciding a major case on federal subsidies.
Outside a health care enrollment center in Westminster, an “Uncle Sam” looks for insurance clients. The U.S. Supreme Court is deciding a major case on federal subsidies. The Associated Press

A U.S. Supreme Court decision due as early as Thursday could end health care subsidies for nearly 6.4 million residents of states that take part in the federal health insurance exchange under the Affordable Care Act, but most experts say Californians who have subsidized insurance under the state’s own exchange needn’t worry – at least in the short term.

The Supreme Court case, King v. Burwell, is the latest round in the fight to overturn the health care reform effort commonly known as Obamacare, and the decision, especially one supporting the plaintiffs, would have wide-ranging national implications.

With its sheer size, covering 1.3 million people, California’s health care market could remain viable even in the worst-case scenario of a federal system collapse if the Supreme Court rules in favor of the challenge, said Nicole Kasabian Evans, spokeswoman at the California Association of Health Plans.

Kasabian Evans said health insurance premiums are required by law to be based on in-state costs of providing health insurance, not on conditions in other states. And she said insurers won’t back out of California’s health exchange, Covered California, even if the Supreme Court upsets Obamacare in the majority of the nation.

“California has the largest health care market in the nation,” she said. “That makes California a desirable market for health plans and offers a lot of stability.”

Dana Howard, a spokesman for the state effort, said the state’s health exchange is projected to be financially self-sustaining, without any federal funding, by the end of this year.

“The good news for Californians is there will be no immediate impact at all on premiums or insurance availability,” Howard said. “None of that is at risk because we operate independently.”

Another 15 states, including New York, Colorado and Massachusetts, and the District of Columbia, have also set up their own exchanges.

What remains unclear is the long-term future of Covered California and the other state exchanges, said Sally Pipes, an outspoken critic of the health care effort and president of the Pacific Research Institute, a free-market think tank based in San Francisco. She said a decision against the White House could still hit the programs of those 16 states if Obamacare “collapses under its own weight” without federal subsidies in much of the nation, causing premiums to shoot up.

Congress, controlled by Republicans, is unlikely to pass a simple fix to the statute, and the 34 states without exchanges would not all create their own, Pipes said.

“I think there are some implications for California that some people aren’t thinking about,” she said.

Started in 2013, California’s state health exchange was the first in the nation under the Affordable Care Act. It has spent tens of millions of dollars to get the word out to potential enrollees, and recently signed contracts with public relations firms totaling $156 million over the next three years for continuing outreach efforts. Among the targets of those efforts are the state’s Latino and African American populations, whose enrollment figures have remained stubbornly low.

Though Obamacare is now largely accepted as the norm in California, critics of national health care reform have continued to attack it on a national and state level through political and legal channels.

In King v. Burwell, Obamacare opponents zeroed in on a sentence that says taxpayers who purchase health insurance through an “Exchange established by the State” can receive subsidies in the form of federal tax credits.

Lawyers for the Supreme Court petitioners – four low-income individuals from Virginia who objected to the act’s health insurance plan – say the phrase means just what it seems to say: Only those who purchase insurance through a state-run health exchange are eligible for federal tax subsidies – not those who buy insurance through the federal exchange at

“As statutory construction cases go, this one is extraordinarily straightforward. There is no legitimate way to construe the phrase ‘an Exchange established by the State’ … to include one established by (the U.S. Department of Health and Human Services),” they argued in their Supreme Court brief.

The government contends the law takes into account states that use the federal exchange and intends the word “state” to refer generically to all government. The act explicitly allows states to establish their own exchanges or lets the federal government establish them “in their stead,” according to the government’s brief.

Anthony Wright, executive director of patient advocacy group Health Access California, said many observers were surprised the case was taken up by the high court.

“It’s such a ridiculous lawsuit. It’s a hyperliteral reading of four words in a several-hundred-page bill,” he said.

Wright said he thinks it’s unlikely a majority of justices, regardless of their political agendas, would throw the nation’s health care system into turmoil. Because of the court’s 5-4 conservative-liberal split, it would just take one conservative-leaning justice “to think what a political disaster this is going to be” and side with the court’s liberal wing, he said.

In a prior challenge that questioned the constitutionality of the act’s tax penalties for individuals who don’t buy health insurance, Chief Justice John Roberts, appointed by President George W. Bush, cast a deciding vote in 2012 to uphold the law. Justice Anthony Kennedy, a Sacramento native, is also considered a potential swing vote in the current case.

Hudson Sangree: 916-321-1191, @hudson_sangree