Stuart M. Gerson

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	Any day now, the Supreme Court will decide the highly anticipated 

, which will determine the viability of a central mechanism of the Affordable Care Act (ACA)-tax credit subsidies for economically eligible citizens.

Stuart M. GersonAt issue is whether the program of tax credits applies only in exchanges set up by 16 states, and not at federally run sites in 34 states. The Obama administration’s economic model for the ACA depends upon the tax subsidies being generally available, and therein lays the significance of the case which puts a keystone element of the ACA at risk.

	All pending cases on the subject of the ACA tax credits are contingent on what the Supreme Court decides in 

. A ruling is expected before the month’s end. 

	Justices Scalia, Thomas and Alito are highly likely to vote to reverse, believing that, at best, it is the job of Congress, not the Court, to fix a defective legislative regime.

	Similarly, there can be little doubt that Justices Ginsburg, Breyer, Sotomayor and Kagan will vote to affirm, seemingly believing that the authorship of a particular exchange does not matter in the total context of the ACA. 

	Justice Kennedy was particularly interested in whether the onus that the regime places on the states rises to the level of compulsion that the Court held violates federalism when it held that the ACA was constitutional, but that the federal government could not make the states expand Medicaid.

	This creates a possible fifth vote to affirm and it is not improbable that Chief Justice Roberts will join Justice Kennedy. I thus think it more probable than not that the Fourth Circuit will be affirmed and the ACA tax credit subsidies upheld.   

 is upheld the primary legal implication is that it will be a victory for a contextual reading of a statute and a defeat for the textualist justices who believe that a statutory provision should be read literally, i.e., when it says State, it means State.

Next: The implications for the healthcare industry

The implications for the healthcare industry

	Affirmance does not really present implications. It simply means that the industry can move ahead on what has been its prevailing assumption (i.e., that the credits will be upheld) and continue writing policies for the lower-income individuals who qualify for subsidies.  

	If the case is reversed and the credits are held unlawful, there will be a sudden and profound effect on the ability of persons who do not qualify for Medicaid but do not earn enough to buy a typical health insurance policy to enter or stay in the insurance market. Given that such people are relatively healthy on average, the composition of risk pools could be adversely affected by their absence and rates would rise.

	Additionally, if the case is reversed, there would be substantial pressure on Congress to legislate to fix the problem.  The Republican majority, however, would only do so if it received concessions on other issues from the administration. 

	It is possible that, if the Court reverses, it could stay its order for a period of time to allow this to take place.  Alternatively, some states and the U.S. Department of Health & Human Services are considering various stop-gap fixes. 

	Another problem is that the Internal Revenue Service has continued to allow the tax credit subsidies.  If they are held to have been improper, there will be an uproar as to taxation issues.

Epstein Becker Green’s Litigation and Health Care & Life Sciences

Articles

Any day now, the Supreme Court will decide the highly anticipated King v. Burwell, which will determine the viability of a central mechanism of the Affordable Care Act.

The countdown to King v. Burwell

	The American system of healthcare delivery, management and insurance is in a state of dynamic change and many of the most innovative developments aimed at efficiency, quality and cost savings are originating with managed care organizations (MCOs). Too often, innovation is met by what the economist Milton Friedman called “the tyranny of the status quo”-the resistance of entrenched guilds to allow productive competition. For occupants of MCO C-Suites faced with such resistance, there is good news both from the Supreme Court of the United States and the Federal Trade Commission (FTC).

	Recently, the 

 that the North Carolina Dental Board was not insulated from federal antitrust liability under the so-called “state action” doctrine when it engaged in anticompetitive conduct to restrain non-dentists from performing teeth whitening services. The Court reaffirmed that state action antitrust immunity for professional board regulatory actions has two prerequisites: the actions must be conducted under “active state supervision,” and they must follow a “clearly articulated state policy” to displace competition.  

	Although the North Carolina case involved a dental board’s attempt to restrict activities of non-dentists, the Court’s opinion has broader implications for how states regulate and “actively supervise” both professional boards in the healthcare sector, and also other state programs requiring active state supervision-such as certificate of public advantage regulations or other innovative “ACO”-like structures that are being sanctioned by states. This decision also illustrates how an individual or entity, subject to perceived over-regulation by a professional board, might mount a defense by scrutinizing whether the board meets the “state action” requirements to be insulated from liability for anticompetitive regulatory actions.

	Shortly after the Court’s opinion was released, FTC Chairwoman Edith Ramirez 

 making clear that the FTC will continue to scrutinize arrangements where market participants act as regulators that are unsupervised by the state: “Today, the Supreme Court affirmed the Federal Trade Commission’s position in recognizing that a state may not give private market participants unsupervised authority to suppress competition even if they act through a formally designated ‘state agency,’” she wrote. “We are pleased with the Supreme Court’s recognition that the antitrust laws limit the ability of market incumbents to suppress competition through state professional boards.”

	The FTC has continued to manifest its authority in this area with respect to other state boards, e.g., in Texas, and the limitation on anticompetitive state action enunciated by the Supreme Court is proving an effective weapon.  

	Often regulatory boards act for protectionist reasons without a clearly articulated state policy to allow anticompetitive conduct. However, even where there is a clearly articulated policy (which was assumed in the North Carolina case), the board in question must be actively supervised by the state itself. The supervision rule “stems from the recognition that where a private party is engaging in anticompetitive activity, there is a real danger that he is acting to further his own interests, rather than the governmental interests of the State.”  

	The North Carolina case provides a potentially useful weapon to MCOs offering innovative services that might not be well received by state boards composed of competitors looking to preserve their economic place. Novel MCOs, ACOs, and other new players in the field who might find themselves subject to over-regulation or exclusion should be poised to benefit from this statement of the law and should take heart in the potential assistance of the FTC and other federal antitrust regulators.

The Supreme Court recently held that the North Carolina Dental Board was not insulated from federal antitrust liability under the so-called “state action” doctrine when it engaged in anticompetitive conduct to restrain non-dentists from performing teeth whitening services.

Stuart M. Gerson

Articles

The countdown to King v. Burwell

A win for competition