We do not know what the Supreme Court will decide about the Affordable Care Act, but we do know that changes to the ACA’s coverage provisions would have a major impact on states already active in implementing the law. Would active states be able to overcome the loss of key provisions? That depends on the Richter Scale magnitude of the ground shift set off by the Court’s decision.
For the purposes of this analysis, we have identified 14 states as actively implementing the health reform law: Alabama, Connecticut, California, District of Columbia, Hawaii, Kentucky, Maryland, Massachusetts, Nevada, New Mexico, New York, Oregon, Rhode Island, and Vermont. They are considered active because they have completed at least five of seven progress criteria based on exchange development, insurance reforms, the Medicaid expansion, and public sharing of implementation information. For more details about which states are active and why, see our activity chart on State Refor(u)m.
The Entire ACA Is Upheld: 2.0 On The Richter Scale
If the entire law is upheld, it would be like a micro quake, unlikely to be felt, but recorded in our history books. States that are already active in implementation would likely have renewed momentum and move even more confidently to implement reforms by 2014. They would continue to work to create health insurance exchanges, build eligibility systems, and make changes to private market rules prescribed by the ACA.
Individual Mandate Declared Unconstitutional, The Rest Of The ACA Upheld: 4.0 On The Richter Scale
Under a scenario where the individual mandate is stripped away, there would be some rattling and shaking, but significant damage would be unlikely if the active states were able to adapt and craft new policies to protect against adverse selection in the individual health insurance market. The Congressional Budget Office has suggested that without the individual mandate, individual market premiums would rise 15 to 20 percent, young and healthy individuals would be more likely to remain uninsured, and less healthy individuals would likely remain insured.
Take-up rates in employer coverage and Medicaid are also projected to fall substantially without the individual mandate. Subsidies in the exchange and annual enrollment might mitigate this problem somewhat, but active states wanting to cover the largest share of the uninsured would likely look for other ways to prevent adverse selection.
Among the states we have identified as active, only Massachusetts has an individual mandate in place. A handful of the active states, like California, might consider following these footsteps and passing an individual mandate, but this would not be easy to accomplish. Others options like setting up auto-enrollment mechanisms, late enrollment penalties, or using aggressive marketing strategies to inform individuals about the new federal subsidies and insurance options would also likely be on the table. At least one estimate predicts that these options would be unlikely to cover as many people as an individual mandate.
Individual Mandate And Market Reforms Stricken: 5.0 On The Richter Scale
If the remedy chosen by the Supreme Court includes striking the ACA’s market reforms such as guaranteed issue and a prohibition on underwriting by health status, it is likely to damage insurance markets and have serious implications for the functionality of health insurance exchanges. Even among active states, very few— only Massachusetts, New York, and Rhode Island—currently have some type of guaranteed issue in place today in the individual market. Without guaranteed issue and clear guidelines on premium prices based on rating rules, state exchanges would face real barriers to providing consumers an actual offer of coverage at a set price. Active states would be free to enact guaranteed issue and rating restrictions at the state level. But, in a world without an individual mandate, insurance plans would be likely to vehemently oppose guaranteed issue and a lack of underwriting by health status.
Some of the early insurance reforms — such as prohibiting lifetime limits on health benefits, prohibiting preexisting-condition exclusions for children, and more — that almost half of the active states have put in place would likely stay on the books, particularly if they are now part of state law or in regulation. Even though states might not have enacted these early consumer protections without the impetus of the federal law, the protections might be popular enough for states to hang onto in the absence of federal requirements.
Medicaid Expansion, Individual Mandate And Market Reforms Invalidated: 7.0 On The Richter Scale
If the Medicaid expansion is declared unconstitutional in addition to the other elements, or if it is invalidated as part of the Court’s remedy, it could cause serious damage to active states’ efforts. Although some active states had programs in place to cover low-income uninsured adults before passage of the ACA, and might have political support to continue these programs, state budgets have only gotten tighter. These active states are unlikely to be able to continue offering coverage to these populations without federal funds.
States could decide to cover low-income parents even if the Medicaid expansion is unconstitutional, but they would cover them with existing federal financing levels (a match rate of 50 percent to 74 percent in FY 2012) and not with the enhanced match of 100 percent federal funds provided under the ACA. Also, because of the Medicaid program’s pre-ACA structure, states would not be able to cover childless adults without a federal waiver.
Some of the active states, including Vermont, Massachusetts and California, already have Medicaid Section 1115 waivers in place that provide federal funds to cover all adult populations until 2014. These states might try to renegotiate these waivers and extend them beyond 2014. Other active states might try to supplement their limited state resources through this type of waiver as well. These waivers are required by law to be budget neutral during a five-year period, but states have in the past been able to find savings to offset the expansion to childless adults. Without filling in these gaps for the lowest income individuals, active states are likely to miss covering from 26 to 50 percent of the uninsured who have incomes below 100 percent of FPL (the Federal Poverty Level).
In active states that do not currently provide coverage for the lowest-income populations without federal funds, and cannot come up with state matching funds to expand coverage to parents, or waivers to cover noncustodial adults, a major gap would exist. Individuals and families between 100 and 400 percent of the FPL would receive subsidies to purchase health insurance through the exchange with the premium tax credit, but the lowest-income adults (those with incomes below 100 percent of the FPL) would no longer be eligible for Medicaid and likely remain uninsured.
Title I Of The ACA Invalidated Or Entire Law Invalidated: 8.0 On The Richter Scale
Whether the court invalidates Title I of the ACA or the entire ACA, the implications for active states would be enormous, even massive, but not totally devastating.
If the Court invalidates the individual mandate, it might also choose to strike down the rest of Title I of the ACA, where the mandate, market reforms and subsidies are laid out and exchanges are funded. In this scenario, states that have made strides to establish and plan for an exchange might still have establishment legislation or executive orders on the books, but they would no longer have federal resources available to move forward. Many of these states would continue to progress, impeded by a lack of federal resources for planning but with some additional flexibility to do things “their own way” without a federal framework.
Federal subsidies to support individuals and small business in the exchange would also disappear. Lacking state funds to provide these subsidies, states’ ability to entice the uninsured to enroll would be dramatically limited. As a result, take-up rates in the health insurance exchange would likely be much lower and the risk of adverse selection would increase. However, the Medicaid expansion provisions are included in Title II of the ACA, so active states would have generous federal resources to provide coverage to the lowest income adults.
If the entire ACA, beyond Title I, is invalidated, myriad other federal grant programs that active states are taking advantage of also disappear, leaving no new resources for states to move forward on delivery system and population health reforms. Active states would continue to look for other ways to meet some of their health reform goals with the limited resources they have through regulation of the markets, Medicaid waivers, and other available levers, but would have significantly fewer tools in the way of federal funding in their toolboxes.
If the Supreme Court invalidates components of the Affordable Care Act, active states will try to adapt to the shifting ground by designing new policies to mitigate adverse selection and cover the uninsured. However, their success in doing so will depend in part on how much the ground shifts. States can likely sustain a 2.0 or 4.0 on the Richter scale, but an impact much greater than that will be a seismic shift, causing the need for a major rebuilding of insurance markets or reconstruction of Medicaid program financing.