5 Takeaways from the Supreme Court's King vs. Burwell Ruling

June 25, 2015

While patients who use the Affordable Care Act's tax credits to buy health insurance are the most directly affected by the Supreme Court's King vs. Burwell ruling, the ripple effects of the decision are much wider.

President Barack Obama on Thursday declared that the Affordable Care Act, “is here to stay” following the Supreme Court’s decision to uphold health insurance subsidies for individuals all 50 states.

While patients who use the law’s tax credits to buy health insurance are the most directly affected by the ruling, the ripple effects of the decision are much wider.

Below are 5 early takeaways from around the Internet that address the possible implications of the ruling on the stock market, the political landscape, and the business of healthcare in general.

1. Good News for Hospital, Insurance Stocks

Bloomberg reported that the stock prices for the nation’s large hospital chains and insurers jumped in the hours after the ruling. Tenet Healthcare Corp. was up 11% an hour after the ruling. Community Health Systems Inc. was up about 10%. Insurers had more modest gains on the news.

However, the bigger story for these stocks is what didn’t happen. Reuters reported last week that the elimination of the subsidy in the 34 states that use the federal exchange would have prompted an estimated two-thirds of the 6.4 million exchange users to drop their insurance altogether. Doing so would have meant, by one estimate, about $15 billion in lost healthcare revenue, a major blow to hospitals, insurers, and pharmacy companies.

2. The Court Constructed the Ruling in a Way That Will Be Hard for Future Presidents to Change

The case centered on whether the law limited subsidies to states that established their own exchanges, as one 4-word clause in the law seemed to suggest. The court could have decided the case by simply stating that the Internal Revenue Service was within its rights to interpret the law as enabling subsidies in all 50 states. A 30-year-old legal principle called “Chevron Deference” dictates that courts should defer to government agencies’ interpretations of laws unless those interpretations are “unreasonable.”

Had the court based its decision on the Chevron principle, the next president might have been able to “reinterpret” the law and limit the subsidies to states with state-run exchanges. However, the court explicitly said it wasn’t relying on Chevron Deference. In effect, the court said the matter wasn’t open to interpretation because Congress’ intent was clear within the context of the entire law.

In The Washington Post, Yale Law School Professor Abbe Gluck says that’s a big deal.

“That takes the question away from a future administration,” Gluck told the Post. “…A strong six member majority of the court is coalescing around this very clean argument. That sends a strong signal to people who politically oppose the law that the court understands the law and is not going to tolerate more of this frivolous litigation that tries to destroy the statute by distorting it.”

3. There’s Much More Work to Be Done

Though the ruling means the country averts a potential rise in its uninsured rate, it won’t change the fact that millions of Americans remain uninsured, despite Medicaid expansion, health insurance marketplaces, and the tax penalties for being uninsured.

In a prepared statement, the trade group America’s Health Insurance Plans alluded to that fact.

“With the certainty provided by the Supreme Court’s decision, now is the time to focus on what matters most to consumers — ensuring access to affordable coverage and high-quality health care,” said Dan Durham, AHIP’s interim president and CEO.

A Gallup survey from April estimated the current uninsured rate at 11.9%.

In an op-ed for The Wall Street Journal, Kaiser Family Foundation President and CEO Drew Altman articulated the to-do list: “reaching those who are uninsured, a generally more difficult population to connect to insurance; stabilizing premium increases in the marketplaces as insurers get a better handle on their risk pools; and determining which of the Medicare payment and delivery reform projects implemented under the ACA are working and should be scaled up.”

4. The End of State-Based Exchanges?

Meanwhile, over at The New York Times’ Upshot blog, Margot Sanger-Katz suggests the ruling may signal the end of state-based exchanges. She notes that many states have had trouble with their marketplace rollouts and the federal government is no longer offering funding to help states set up their own exchanges.

“Now, with the Supreme Court ensuring that every state’s consumers will have equal access to federal subsidies, it is becoming clear that more of those states will revert to a federal system for enrolling people in health insurance,” she writes.

5. With the Supreme Court Battle Over, State Battles Continue

Whether or not states change their method of providing a healthcare marketplace, each decision they make will likely continue to be the subject of intense political debate. NPR reports that more than 700 health reform-related bills were introduced in state legislatures last year or carried over from 2013. They range from major questions about whether to set up a state-run exchange, to relatively minor questions, such as whether to require healthcare marketplace advisors, known as “navigators,” to undergo criminal background checks.

As Fred Schulte writes, “Bills to advance or cripple the law in statehouses didn't come to a halt in the months that lawmakers awaited the Supreme Court decision. They may well smolder for months or years.”