Feds give insurers an exchange exit option if House v. Burwell nixes subsidies

Photo credit: Getty/John Spannos

Though a ruling for the plaintiffs in House v. Burwell would strain the finances of companies offering products on the public insurance exchanges, federal regulators appear to be offering some relief.

In a clause in this year’s qualified health plan (QHP) contract, the Centers for Medicare & Medicaid Services says it realizes that insurers develop their plans for the federal marketplace based on the assumption that qualified enrollees will have access to cost-sharing subsidies.

But in the event that assumption ceases to be valid during the terms of the contract, “CMS acknowledges that the issuer could have cause to terminate this agreement subject to applicable state and federal law,” according to the contract.

That language appears to refer to House v. Burwell, a case in which Republican Congress members are challenging the legality of funding for advance premium tax credits and cost-sharing reductions, health policy expert Timothy Jost points out in a Health Affairs blog post,

This May, U.S. District Court judge Rosemary M. Collyer ruled in favor of the plaintiffs. The D.C. Court of Appeals will rule this fall or early next year whether to uphold Collyer’s decision, Jost says.

If the House prevails, it would destabilize the Affordable Care Act marketplaces, as insurers would be obligated to reduce out-of-pocket costs for lower-income enrollees without reimbursement from the government, FierceHealthPayer has reported.

The contract clause, then, would allow insurers to reduce their losses by “effectively transferring the cost of a House victory to low-income enrollees who would lose their marketplace coverage,” according to Jost.

But the clause doesn’t constitute total relief for insurers. Jost notes that even if an insurer is able to terminate its marketplace participation, it still has an obligation to provide coverage for its QHP enrollees for the full year under applicable state law. And the clause doesn’t specify how much notice insurers would have to give regulators.