Health Care Industry Concerns Grow Regarding Federal Exchange Subsidies to Enrollees

The Supreme Court is scheduled in June to determine the legality of subsidies to federal exchange enrollees. The wording in the Affordable Care Act (“ACA”) suggests that subsidies can only be paid to enrollees from state-controlled exchanges. The implication of a negative ruling by the high court could place a number of enrollees in a position where they can no longer afford their health care premiums.

There are estimates from the Urban Institute suggesting that in 2016 total spending on hospital care could be reduced by $6.3 billion. The Administration and Congress has been approached regarding what is their “Plan B” if the Supreme Court rules against the subsidies. Neither party has come forward to discuss their Plan B.

A negative Supreme Court ruling will be financially significant for the hospital industry. There are a number of reasons for concern, including:

• the Administration’s FY 2106 budget indicated material reductions in Medicare Reimbursement, 
• States are suggesting they need to reduce their Charity Care payments to hospitals and 
• new payment models that introduce quality metrics are being introduced to the industry.