The Obama administration gave conditional approval Monday to Arkansas, Delaware and Pennsylvania to expand their roles in the insurance marketplaces created under the 2010 health care law, ahead of a high court decision that could wipe out federal health insurance subsidies for millions.
Letters from U.S. Health and Human Services Secretary Sylvia Burwell to Pennsylvania Gov. Tom Wolf and Delaware Gov. Jack Markell, both Democrats, and Arkansas Republican Gov. Asa Hutchinson say the approval reflects the expectation that the states' roles in the marketplaces will expand beginning in the 2016 policy year.
Right now, the federal government operates the marketplaces in about three dozen states, including Pennsylvania, while some states, including Delaware and Arkansas, are in charge of some functions. But plaintiffs in a lawsuit before the U.S. Supreme Court say the Obama administration is unlawfully providing subsidies to millions who buy insurance through the federally run marketplaces. If the court agrees, it could mean the end of the subsidies to most or all of those states, including Florida.
Conversely, federal subsidies could continue to flow to states that run their own marketplaces, keeping insurance premiums lower. That is what helped compelled the applications by Delaware and Pennsylvania.
In a statement, Wolf said his state is "now in a better position to provide security to those who may lose their subsidies, and possibly, not be able to afford their health insurance." However, approval from the Republican-controlled Legislature would be required for any money needed to run a marketplace and potentially for the legal authority, and it is not clear where the body will stand on the issue.
Hutchinson, who took office in January, followed through on actions under his Democratic predecessor, Gov. Mike Beebe, to seek more control over the state's marketplace, although the state's Republican-controlled Legislature earlier this year approved a measure that holds up plans for a state-run marketplace until the high court rules. The Legislature would then have to decide on the marketplace if justices side with the plaintiffs.
Delaware officials said Monday they have made no final decision on whether to move entirely to a state-based marketplace or leave some functions to the federal government. Its status as a partnership state that already runs some marketplace functions puts it in a legal "gray area" when it comes to the potential impact of the subsidies case, Delaware Health and Social Service Secretary Rita Landgraf said.
Pennsylvania is also looking at a model that would leave some functions to the federal government, such as using the federal web portal healthcare.gov to enroll people.
Delaware and Pennsylvania received conditional approval to run marketplaces for individual and small business coverage plans beginning in 2016. Arkansas received the conditional approval to run the small business marketplace in 2016 and the individual marketplace in 2017.
The Obama administration's initial approval lays out a path for other states to follow if the Supreme Court overturns the subsidies. It also underscores that there's bipartisan concern over the uncertainty generated by the case.
Other GOP governors may look to Hutchinson's example, especially if Congress cannot agree on a fix.
If the court rules against the subsidies, President Barack Obama is expected to put the onus on Congress for restoring the aid. At the same time, Burwell has now signaled that she is willing to work with any state — Republican or Democratic — to come up with an administrative work-around.
Arkansas, Delaware and Pennsylvania are exceptions among the states that would be most affected by a ruling invalidating the subsidies. Twenty-six of the states where subsidies are most at risk have Republican governors, and many of those legislatures are also under GOP control.
More than 10 million people nationwide have signed up for private health insurance this year under Obama's signature health care law. In the states involved in the court case, 6.4 million people are receiving subsidies worth more than $1.7 billion a month in total.
The court case revolves around the literal meaning of a handful of words in the complex law.
Plaintiffs say the law only allows subsidies in states that set up their own insurance marketplace. Only 13 states and Washington, D.C., are running their own markets this year. The Obama administration says that, when read in context, the law allows subsidies in all 50 states regardless of whether federal healthcare.gov is in charge of sign-ups.