Just before Thanksgiving, Governor Mary Fallin announced a pair of important decisions related to the Affordable Care Act. She said that Oklahoma would not participate in the expansion of Medicaid for low-income adults and would not create its own state-based health insurance exchange. Where do these decisions leave Oklahomans?
The Affordable Care Act provides two primary mechanisms to extend health insurance coverage to most of the 48 million Americans, and 694,000 Oklahomans, who are currently uninsured. The first is to extend Medicaid coverage to working-age adults with incomes below 133 percent of the federal poverty level, roughly $30,000 per year for a family of four. Medicaid is a joint federal-state program; to encourage state participation in the expansion of coverage, the federal government committed to paying 100 percent of the cost of newly eligible Medicaid participants for three years (2014-16) and ultimately to pay 90 percent of the cost from 2020 forward.
Unfortunately, refusing to expand Medicaid slams the door on roughly 130,000 uninsured Oklahomans with incomes below the poverty level. This population will be stuck in a huge ‘coverage crater‘, without access to private coverage or public support. This decision is also a major blow to Oklahoma’s health care providers, who will remain stuck with absorbing and trying to pass along the crippling costs of uncompensated care, which total $600 million annually for hospitals alone, according to the Oklahoma Hospital Association.
The second coverage mechanism provides subsidies in the form of premium tax credits for those with income between 100 and 400 percent of the federal poverty level, or roughly $23,000 – $92,000 for a family of four. Eligible individuals will use their premium tax credits to purchase insurance through newly-created health insurance exchanges, which are online marketplaces where individuals and small businesses will choose between competing private insurance plans, beginning in 2014.
There will be exchanges in every state. States were given the option of creating and administering their own exchanges; where they opt not to do so, the federal government will operate exchanges in the state. Governor Fallin’s decision not to create a state-based exchange simply means that eligible individuals and families will use their premium tax credits to purchase subsidized insurance on an exchange built and operated by the federal government. They will have access to the same range of insurance products, receive the same premium tax credits, enjoy the same consumer protections, and be subject to the same cost-sharing responsibilities as if Oklahoma were operating the exchange.
For the consumer, then, the Governor’s exchange decision will have minimal consequences – with one notable caveat. Attorney General Scott Pruitt has filed a lawsuit challenging the availability of premium tax credits to subsidize the purchase of insurance on federally-operated exchange. As stated in the federal government’s motion to dismiss Oklahoma’s lawsuit:
In this case, Oklahoma asserts a position that is directly adverse to the approximately 381,500 Oklahoma residents who will receive a premium tax credit under the act, but who would not if Oklahoma were to prevail in this suit.
The credits would reduce Oklahomans’ federal tax liability by at least $1.5 billion per year, according to a Families USA study cited in the government’s motion.
The state’s case, based on arguments developed by law professor Jonathan Adler and the Cato Institute’s Michael Cannon, points to language in certain sections of the Affordable Care Act that tie tax credits to “an Exchange established by the State…” The federal government bases its motion to dismiss on the state’s lack of standing to file suit. It argues:
It is well settled that the jurisdiction of the federal courts is limited to the resolution of actual cases or controversies, and that a state’s attempt to litigate its citizens’ rights or obligations under federal law does not create such a case or controversy.
Even if the state’s case is allowed to move forward, Oklahoma’s position appears to be on extremely weak legal footing. As law Professor Timothy Jost, health policy expert Judy Solomon, and others have argued, the Affordable Care Act is clearly premised on premium tax credits being available on federally-established as well as state-based exchanges. Many sections of the law, as well as the bill’s legislative history, establish that federal exchanges can offer premium tax credits. In addition, the Treasury Department has issued regulations to implement tax credits on federal as well as state exchanges. As Solomon notes:
But even if the statute were ambiguous, a court examining whether the Treasury regulations are valid would certainly defer to the agency’s interpretation of the statute because it is both permissible and reasonable.
Due to the Medicaid decision, Oklahomans’ federal tax dollars will be going to pay for health care for Californians and New Yorkers, while leaving some 150,000 Oklahomans out in the cold. It is unfortunate that Attorney General Pruitt, supported by the Governor, would choose to pursue a lawsuit that if successful, would only mean that an additional 380,000 uninsured Oklahomans would be denied access to insurance through a health exchange. We can only hope that the lawsuit is dismissed quickly and the state pursues a new direction that puts the interest of uninsured Oklahomans and Oklahoma health care providers first.