King v. Burwell in Perspective: A Conversation with Professor Sara Rosenbaum

Last March, we sat down with the Milken Institute School of Public Health's Sara Rosenbaum, the Harold and Jane Hirsh professor of health law and policy, to hear her take on 2015 Supreme Court cases that could change the course of health care in the United States. We recently followed up with her about one particularly influential case, King v. Burwell, which upheld subsidies mandated by the Affordable Care Act.

In the interview below, Professor Rosenbaum discusses why much of the decision came down to four (not-so-little) words: Section 36B of the law states that subsidies would be available to consumers who purchased their insurance through an exchange "established by the state." Only a fraction of states, however, have established those exchanges; the rest rely on the federal healthcare.gov system. Proponents of the King argument contended that consumers who buy on the latter exchanges weren't eligible for subsidies.

Read on to hear more from Professor Rosenbaum about why the court came down in favor of Burwell and the implications of the ruling.

MHA@GW:You mentioned in our original post on King v. Burwell that any part of the health care industry that depends on insurance as the payment mechanism is watching this case and understands the enormous seriousness of it. What does this ruling mean for the future of the Affordable Care Act and does this change anything?

Sara Rosenbaum: This case settled the most basic question that you can ask about the Affordable Care Act, and that is whether the underlying structure of the act — the delivery of subsidies to people who need it in order to be able to buy insurance — will survive. This was the case, in many ways, that validates the operating design of the Affordable Care Act [and] all of the insurance reforms of the act. You can't have the insurance reforms without the mandating and you can't have the mandating without the subsidies. As the court said, they are interlocking parts of a whole and the King case settled any questions about the legality of this or what Congress intended to do.

Why did the court rule in favor of Burwell? What are some of the main points that characterize the majority opinion here?

SR: The court began the decision by making clear that they completely understand the insurance market. They said that if [the United States] wants to have good, solid, affordable, reliable, private insurance available to anybody who needs it — who doesn't get employer coverage or who doesn't get coverage through a public insurance program — [the country] needs to do three things. [The country has to] reform the insurance markets and make coverage available to everybody who needs it. You have to require that people buy the coverage because you need a health risk pool to support this kind of a market-based reform, and you need to make that coverage affordable.

The court left no doubt at all that it really gets the heart and soul of the Affordable Care Act." — Professor Sara Rosenbaum

The court left no doubt at all that it really gets the heart and soul of the Affordable Care Act. The court then went on to say that in the act, which is a thousand pages long, there are a few words that are ambiguous. Normally what courts do when there's ambiguity in a law is say, "We'll let the agency that is charged with implementing the law tell us what it means, and if Congress doesn't like it, of course Congress can change the law or a new administration can change it." Here the court said that this issue is much too big for that. It goes to the heart of the Affordable Care Act. It has enormous economic consequences. So really the only body competent to interpret what it means to do is the court.

Most people remember the case of Marbury v. Madison, probably from a civics class if not from law school. Marbury says it is the courts that tell us what the law means. So with that setup, the court then...said there are these four words [in the ACA] that are peculiar. It's not clear what Congress means but to describe that [meaning], we're not just going to focus on these four words. We're not just going to read them literally. We have to take these four words and put them into the whole context of the law. Once the court did that, it became apparent for several reasons that the four words should not be read literally as eliminating subsidies for people who live in states that use the federal exchange.

Those reasons were basically as follows: one being that you look at the fundamental purpose of the law — making insurance available to nearly everybody in the United States. Congress wasn't making insurance available only to participating states, which is the way Medicaid works. Medicaid is a program for participating states. That's not this kind of law.

The second reason is that the overall structure of the law is one that's clearly built on nationwide things: nationwide market reforms and a nationwide mandate. These are requirements everywhere; it doesn't matter where you live.

The third reason was that — if you read the law carefully, which the court did — all kinds of provisions make clear that everybody is learning that subsidies are available to everybody who needs them and qualifies for them. This is not confined to residents in states that established the exchange.

Finally, if you read those four words in isolation you would end up with all kinds of crazy anomalies in the law. If you assumed that subsidies were available only in states that established the exchanges, then the states that had not established exchanges would have no employer mandate because the mandate triggers only if employees actually get subsidies on the exchange. If you're an employer in a state whose employees can get subsidies on the exchange then there is, by definition, no employer mandate.

When the court put all this together, what they came up with is a law that's nationwide.

Who will feel the impact of this decision most profoundly, either in the immediate future or the near future?

SR: You could turn the question on its head and ask who won't feel the impact of the decision. Basically, the residents of the 34 states that use the federal exchange are spared. They are spared the loss of subsidies. Six-and-a-half million people are spared the loss of their coverage overnight. The health care systems in those states are spared the loss of people with insurance as patients. The insurance industry is spared a death spiral and population health is positioned much more strongly. The potential to improve the health of the population by improving access to appropriate care [is spared]. Everybody wins because of this decision. There are no losers.

"The potential to improve the health of the population by improving access to appropriate care [is spared]. Everybody wins because of this decision. There are no losers." — Professor Sara Rosenbaum

What are some things that could affect the way the Affordable Care Act is implemented from here on out?

SR: Hopefully, now that the basic structure of the law is settled, we can begin to pay attention to the parts of the law that really need to work much better. The most important is the Medicaid expansion. There are still 21 states that, as a result of the court's 2012 decision, have refused to extend Medicaid to the poorest residents. You have about 4 million people who are too poor to qualify for exchange subsidies but are ineligible for Medicaid because the state doesn't cover all poor adults. The number one issue is clearly to close this gap to figure out how to bring the remaining 21 states into the fold.

Another major issue is to strengthen the quality of the private insurance products that are sold in the exchange and strengthen the level of support they give to the people who buy them. Right now, the premium subsidies are actually pretty limited and clearly more funding is needed. People who are lower income people have a lot of financial exposure. The hope is at some point that Congress and the White House can get together and improve the subsidies for premiums and for cost sharing.

A third challenge is probably building on the quality of the coverage from the perspective of provider networks and coverage limits for people with serious health conditions. The law says that nobody can be denied coverage and there are limits on how much annual out-of-pocket expenses you have to make for covered benefits, but people who are sicker need more coverage than these plans are providing.

Finally, I think a big issue is how to better integrate population health and health care so that the health care system is not just trying to make sick people better but actually trying to improve their health. Much attention has been paid to new models of health care such as accountable care organizations, which are conceived of as much more integrated delivery system arrangements. Providers not only worry about whether you're taking your cholesterol medicine but whether you're eating right. It's getting health care to more holistically embrace health that I think is the big challenge.