Can 6 Words Impact Millions of People?

1. Can 6 Words Impact Millions of People?
The Affordable Care Act (ACA) law established in 2010 has the Marketplace (or Exchange) as a
centerpiece, where individuals and small employers can go and buy health insurance plans. The law
gives flexibility to each state to either create and run their own exchanges or let the federal government
run it. Currently there are 14 State-based Marketplaces; 3 Federally-supported Marketplaces; 7 State-
Partnership Marketplaces; 27 Federally-facilitated Marketplaces (Source: Kaiser Family Foundation)
On Exchange, the Individual’s can buy cost effective health plans and also get subsidy (tax credits) to
reduce their share of monthly premium they have to pay to insurance companies. The Subsidy obtained

2. by Individuals on the exchanges run by federal government (FFM) has been challenged in the Supreme
Court. This challenge is based on the interpretation of 6 words written in law– ‘an exchange established
by the states’ and the plaintiffs argument is that the language of the ACA stipulates that insurance
subsidies should only be available in states that set up their own exchanges, not states that rely on the
federally facilitated marketplace (HealthCare.gov)
If the Supreme Court agrees with plaintiffs, the impact will be widespread. The individual, who reside in
states where exchange is federally facilitated, will lose their subsidies. This will trigger a chain reaction
of impacts – not only to insured population but to entire ecosystem.
Impact to Insured Population– A recent GALLUP survey reported that the uninsured rate was down to
11.9% for the first quarter of 2015.
The ruling in favor of plaintiff has potential to impact the entire market segment – Subsidy eligible
individuals as well as the individuals who are not eligible for subsidy. A lot of people will discontinue the
coverage as losing subsidies will make the plans unaffordable.
According to a report published by NY Times –about 7.5 million people could lose their subsidies in the
states that use the federal health care marketplace. The discontinuation of coverage by a large number
of subscribers will drive the cost of premium upwards which will directly impact the other type of
consumers who are not eligible for subsidy. Ultimately most of impacted individuals may discontinue
the coverage as they find the plans becoming increasingly unaffordable. The overall impact will result in
upwards spiral of uninsured population.

3. Impact to Payers – The insurance companies have made disruptive changes to their business model to
embrace the implementation of ACA. This new ruling has potential to further disrupt their business
model. The investments made by payers to make this work are yet to reach the payback period and any
negative changes will create cost pressures.
Impact to Ecosystem – The implementation of Marketplace brings a new complexity to manage the life-
cycle of exchange consumers. CMS (Centers for Medicare & Medicaid Services) regulations required
changes in systems and processes to support new guidelines and technical requirements. In order to
bridge this gap, in system and process requirements, multiple vendors came out with exchange specific
offerings resulting in creation of a marketplace ecosystem. It’s no longer a business model of just three
entities – CMS, Payer and Consumers. The ruling in favor of plaintiff is bound to disturb this newly
created ecosystem and most of investments made by the ecosystem vendors will become a sunk cost.
Such large population losing subsidies will also have some political fallout but to a large extent that will
depend on availability and deployment of plan ’B’ by the states which are impacted by this decision.
The health insurance industry has gone through major changes when Affordable Care Act was signed
into law and now the healthcare of millions of newly insured people hang in balance on interpretation
of 6 words ‘an exchange established by the states’. These words have potential to impact Millions of
insured people.