When King v. Burwell was argued, sixteen states plus the District of Columbia had a state-run exchange. That number will likely change before the opinion is issued later this month. Each of these states received $5 billion of federal funds, although that spigot shut off for good on January 1, 2015. Under the ACA, each exchange was supposed to be “self-sustaining” by that date. Indeed, many states that established the exchanges did not budget extra funds, expecting the exchanges to make money. That didn’t quite work out.
Hawaii, one of the 16 states, has announced that it will disestablish its exchange because it was “unable to generate sufficient revenues to sustain operations.” Despite $200 million of federal money being spent, the exchange only signed up 70,000 people, well short of the expected 300,000. Aloha (goodbye)! Hawaii is not alone. Covered California is projecting an $80 million deficit this year, and there are questions about the “long-term sustainability of the organization.” Vermont had a $20 million project deficit, and in the words of the New York Times has “unraveled.” Already Oregon, Massachusetts, Nevada, New Mexico, have also been unable to manage their exchanges.
While these failures do not bode well for the long-term success of the ACA, there is a much more pressing question in light of King v. Burwell. If a state has once established an exchange, but then disestablishes it, does that render it no longer a state-based exchange, warranting subsidies? In other words, this boils down to a question of antidisestablishmentarianism–will HHS take the position that exchanges cannot be disestablished. (In the 3rd grade, our teacher made us copy words out of the dictionary. I distinctly recall one girl copying this word, and we all marveled at how long it was. I never thought I would use it in a sentence).
So what happens to Hawaii? According to one report, Hawaii “will maintain a Supported State-based Marketplace in which the state would provide local customer support.” This will put Hawaii in the same boat as Oregon, Nevada, and New Mexico who also have what is known as a “Supported-Stated Based Exchange.” The states operate certain functions using the federal platform, but the feds perform virtually of the responsibilities for managing the exchange. It is an open question–which the King v. Burwell parties do not agree on–of whether the SSBE exchanges are state-based. Potentially add one more state to that list.
Stay tuned. I have a piece coming out shortly that assesses the legality of various executive actions the Administration can take if it loses in King v. Burwell. This will be an interesting summer.
Update: In the SG’s brief, the government seems to suggest that Oregon, Nevada, and New Mexico are not state-based exchanges:
Thus far, 16 States and the District of Columbia have established Exchanges for themselves, while 34 States have opted to have HHS do so in their place …. HHS’s statistics include three States (Nevada, New Mexico, and Oregon) that established their own Exchanges but are relying on HHS to make eligibility determinations.
This seems pretty close to a concession that the supported-stated based exchanges are not state-based, but this can change with new HHS regulations.