June 2015

US Supreme Court Upholds ACA Tax Credits for All Qualified Individuals Purchasing Health Insurance Through a Marketplace Exchanges

In King v. Burwell, the Court’s 6-justice majority concludes that denying ACA tax credits to individuals on federally-facilitated State exchanges is contrary to what Congress intended.

King v. Burwell, U.S. Supreme Court No. 14-114, decided June 25, 2015.

In another major challenge to the Patient Protection and Affordable Care Act (“ACA”), the federal health reform law, the U.S. Supreme Court, on a 6-3 vote, upheld the Internal Revenue Service’s regulation extending federal tax credit support provided under the ACA to all qualified individuals enrolled in a marketplace Exchange regardless of whether the State elected to operate its own Exchange or exercised its option to have the federal government do so.

The Court’s decision rests on its interpretation of the law’s language rather than on constitutional grounds. Chief Justice Roberts, writing for the majority, said the challenged language is ambiguous; however, reading that language within the context of the ACA’s overall statutory framework compels an interpretation extending availability of the law’s tax credits to all qualified individuals purchasing coverage through an Exchange whether state-operated or federally-facilitated. The limited reading furthered by the petitioners “would destabilize the individual insurance market in any State with a Federal Exchange, and likely create the very ‘death spirals’ that Congress intended the Act to avoid.”

The limited reading furthered by the petitioners “would destabilize the individual insurance market in any State with a Federal Exchange, and likely create the very ‘death spirals’ that Congress intended the Act to avoid.”

The petitioners in King v. Burwell specifically pointed to ACA language making tax credits available to low and moderate income individuals purchasing health insurance coverage through an “Exchange established by the State.” The government argued in response that each State is required by the ACA “to establish” a marketplace Exchange and may do so, as allowed by the ACA, by either operating its own Exchange or defaulting to operation by the federal government. Facts before the Court showed that in 2014, 16 states operated their own Exchanges while 34 were federally facilitated. Of the 7.3 million individuals who purchased health insurance coverage through an Exchange, 5.4 million did so through federally-facilitated Exchanges and approximately 87% of those individuals were eligible for tax credits.

Petitioners’ arguments about the plain meaning of the challenged language are strong, the Court said, when viewed in isolation, but other language in the law, as highlighted by the Court, supports tax credit availability to qualified individuals purchasing insurance coverage on an Exchange regardless of operational source. Its task is to establish meaning within context. “A fair reading of legislation demands a fair understanding of the legislative plan.”

The Court noted that Congress based the ACA on three major reforms:

1) guaranteed issue and community rating requirements; 2) mandated individual insurance coverage at the risk of tax penalty; and 3) tax credits for individuals with household incomes between 100%-400% of federal poverty. Denying tax credits, a fundamental aspect of the ACA’s reform strategy, to individuals in federally-facilitated Exchange states would lead to substantially different operations and outcomes under this law in some states than in others, an implausible reading of what Congress intended. The Court referenced a study predicting that denying tax credits in federally-facilitated Exchange states would result in premium increases of 47% and enrollment decreases of 70% while another study predicted premium increases of 35% and enrollment decreases of 69%; collateral impacts also would result in insurance markets outside an Exchange. “[Tax] credits are necessary for the Federal Exchanges to function like their State Exchange counterparts, and to avoid the type of calamitous result that Congress plainly meant to avoid.”

The Court’s ruling is important to Iowa.

Iowa’s Exchange is federally-facilitated. Technically, Iowa operates a partnership Exchange, relying upon the participant enrollment technology of the federal government while retaining plan management and consumer assistance functions through the Iowa Insurance Division. Of the 45,000 Iowans on Iowa’s marketplace exchange in 2015, more than 33,000 were eligible for tax credit support.

Iowa Supreme Court says portions of the Iowa Board of Medicine’s rule, not consistent with standards of medical practice, place an unconstitutional burden on a woman’s exercise of her constitutional rights to an abortion.

Planned Parenthood of the Heartland v. Iowa Board of Medicine, No. 14-1415, filed June 19, 2015

The Iowa Supreme Court, on a 6-0 vote, invalidated as unconstitutional those portions of the IBM’s telemedicine medication abortion rule prohibiting physicians from inducing an abortion by providing an abortion-inducing drug without first providing a physical examination of the woman, without being physically present with the woman at the time of abortion-inducing drug is provided, and without scheduling a follow-up appointment with the woman at the same facility where the abortion-inducing drug was provided. In that case, Planned Parenthood of the Heartland v. Iowa Board of Medicine, portions of the IBM rule defining “abortion-inducing drug” and requiring compliance with Iowa’s law on parental notification prior to performing an abortion on a minor were not challenged on appeal and, as such, the Court affirmed them.

The Court looked to the IBM’s stated purposes for adopting its medication abortion rule (found at Iowa Administrative Code (IAC) 653-13.10 but put on hold by the Court pending the outcome of this appeal). The IBM particularly emphasized the need to protect the health and safety of women seeking a drug-induced, or medication, abortion. The Court engaged in extensive discussion of each patient health and safety interest asserted by the IBM for its rule. In doing so, the Court also looked to the IBM’s more recently adopted general standards for telemedicine practice in Iowa (IAC 653-13.11, a rule now in effect and not affected by this decision). The Court noted that physicians are required by the IBM’s general telemedicine rule to “utilize evidence-based telemedicine practice guidelines and standards of practice, to the degree they are available, to ensure patient safety, quality of care, and positive outcomes” and to perform “a physical examination, when medically necessary, sufficient for the diagnosis and treatment of the patient.”

In examining standards of medical practice for medication-induced abortions, the Court looked to practice standards of the American College of Obstetricians and Gynecologists (ACOG) which provide that a physical examination by the physician prior to proceeding with a medication termination of pregnancy is not medically necessary. Rather, ACOG says, the medical information necessary to performing a medication abortion is contained in the patient’s history, blood work, vital signs, and ultrasound images which can be accessed by reviewing the patient’s records remotely or in person. The Court also found that the weight of the evidence indicates that a pelvic examination prior to administering the abortion-inducing medication does not provide any measurable gain in patient safety. The Court further looked to FDA protocol for administration of mifepristone and misoprostol to induce an abortion, noting that FDA approved protocol does not prohibit physicians from using drugs in a different, “off-label,” manner; that additional studies have led to the development of safer and more effective administration protocol; and it is that newer protocol the IBM’s rule is meant to preclude.

The Court found little medical practice or drug regulatory support for the IBM’s asserted interests in adopting its medication abortion rule but substantial challenges for a woman seeking an abortion under the rule’s physician examination and in-person requirements. “It is not disputed the rule would have the effect of prohibiting telemedicine abortions in Iowa.” In balancing the IBM’s purposes in adopting the rule, which are not supported by the medical record, in light of the burdens the rule places upon a woman seeking to exercise her constitutional rights, the resultant consequences for the woman unconstitutionally outweigh the IBM’s asserted interests.

“Most significantly,” the Court went on to say, “the Board has adopted a rule that generally approves the use of telemedicine.” Yet, in its medication abortion rule, “the Board appears to hold abortion to a different medical standard than other procedures.” As such, the Court also hinted at constitutional equal protection issues.

The IBM issued a release on June 19, the same day the Court filed its opinion, noting the Court’s decision and stating that the IBM would discuss ruling at its July 9-10, 2015 meeting.