Earlier, I updated this post by acknowledging that the ACA may not have created the anomaly that, on plaintiffs’ reading, a state would have to cover some of the costs of non-essential benefits even though the federal government wouldn’t help pay for the essential benefits. As Jonathan Adler pointed out, it seems that §1311(d)(3) of the ACA eliminated the anomaly: states are under the obligation to defray the cost of any additional, non-essential benefits only with respect to “an individual eligible for the premium tax credit under section 36B.” On plaintiffs’ theory, if you’re in a state with a federally established exchange, there are no such people.
But Jonathan isn’t quite right, as he admitted in a later exchange. As it turns out, §10104(d) of the ACA actually amended §1311(d)(3) of the Act. (Yes, that’s weird. Provisions in the ACA amended other provisions of the ACA. Just roll with it.) And the text in the newly amended §1311, which is codified at 42 U.S.C. §18031, fully supports the position that I laid out. In any State that requires insurers to cover non-essential benefits, the statute says that “[a] State shall make payments … to an individual enrolled in a qualified health plan offered … to defray the cost of [those] additional benefits.” There’s no statutory requirement that the “individual enrolled a qualified health plan” must be eligible to receive tax credits. Eligible or not, the state must defray the cost of any additional benefits.
Which is to say that, on plaintiffs’ reading, the statutory anomaly that I discuss below does exist. And it’s another reason for thinking that Congress couldn’t have meant to withdraw tax credits from the states that declined to establish their own exchanges.
I was reading the ACA again yesterday—a pretty typical Sunday for me—when I came across another statutory clue that Congress could not have meant to strip tax credits from states with federally established exchanges.
The ACA requires all individual and small-group insurers to cover the “essential health benefits,” but the statute was pretty vague about what exactly what that meant. So Congress asked the Secretary of HHS to flesh out what counted as “essential.”
Congress knew, however, that some states require insurers to cover certain benefits—for example, expensive autism therapies and in vitro fertilization—that the Secretary might decide weren’t essential. Congress was fine with those state mandates, but it didn’t want to pay for them. So the ACA limits federal subsidies to defraying the costs of the essential health benefits.
Still, Congress wanted plans that had lots of these additional, state-mandated benefits to be affordable. So Congress told the states that if they required insurers to cover non-essential services, the states would have to “defray the cost” of those services.
In the ACA, then, the allocation of responsibility is clear: to guarantee the affordability of health plans, the feds would provide tax credits and cost-sharing subsidies for the essential health benefits, and the states would help pay for any “additional benefits.”
The plaintiffs in King, however, have advanced a reading of the ACA that would make a hash of this statutory scheme. In states that refused to set up their own exchanges, the federal government would contribute nothing toward the costs of health plans. The states, though, would still be on the hook for “defray[ing] the cost” of their extra insurance mandates.
In other words, the King plaintiffs would read the ACA to impose on those states a financial mandate to cover non-essential benefits—even though the federal government wouldn’t pitch in a dime to help cover the essential health benefits. That seems senseless, even perverse. And it’s another reason to think that the government has the better reading of the statute.