Obamacare Decision Will Affect N.C.

Later this month, the U.S. Supreme Court will decide whether health insurance subsidies issued under the Affordable Care Act should be distributed only to insurance companies in state-based exchanges.

If the justices rule that states like North Carolina that enroll people in Obamacare through the federal exchange would lose their tax subsidies — as plaintiffs note is the plain language of the law — the ruling could affect Medicaid recipients, too. As written in the federal health law, federal Medicaid funding relies on states creating their own exchanges.

Modern Healthcare columnists Virgil Dickson and Lisa Schencker explain how current Medicaid enrollees in federal exchange states like North Carolina could end up being on the budgetary chopping block:

The first is a section of the law that says federal Medicaid funding is contingent on a state ensuring coordination and secure communication between its Medicaid program, its Children’s Health Insurance Program, and “an exchange established by the state.” …

“If the government loses and Congress does not revise the ACA, HHS might tell the states that they have to return to their former eligibility rules or lose future federal funding for their Medicaid programs,” said Jesse Witten, a partner at Drinker Biddle in Washington.

In the justices outlaw Obamacare subsidies in federal exchange states, a new set of lawsuits affecting the Medicaid implications of the ruling would be inevitable. In 2012, a 7-2 majority of the justices ruled Obamacare’s original expansion of Medicaid coercive and unconstitutional. The court may take a similar view of an HHS order requiring that states using the federal Obamacare exchange to refund all their traditional Medicaid money from Washington. (More than 75 percent of North Carolina’s $14 billion Medicaid spending comes from the federal government.)

Yet transitioning to a state exchange not only would entrench Obamacare further, but also could result in a financial nightmare. The seed money needed to establish a state exchange is no longer available. North Carolina planned to establish its own exchange under former Gov. Beverly Perdue, but more than $70 million in start-up grants were returned to the feds once Republicans took control of the legislature. State lawmakers also passed Senate Bill 4 into law — an act negating the decisions to create a state exchange and expand Medicaid.

In addition, state exchanges such as those in Massachusetts, Oregon, Minnesota, Vermont, Hawaii, and Rhode Island are failing or have failed to be self-sustaining, since planning and establishment grants awarded by the federal government expired at the beginning of the year.

The Washington Post reports that operating budgets are collapsing because most of the exchanges “are independent or quasi-independent entities. For most, the main source of income is fees imposed on insurers, which typically are passed on to consumers,” the Post notes.

In addition, the Post says, call centers, “where operators answer questions and can sign people up,” drive a lot of the costs at the exchanges. “Enrollment can be a lengthy process — and in several states, contractors are paid by the minute.”

Observers from all sides of the debate will watch the Supreme Court closely as its term winds down.

Katherine Restrepo is health and human services policy analyst for the John Locke Foundation.