If the U.S. Supreme Court rules for the plaintiff later this month in the case of King v. Burwell, 7.5 million Americans stand to lose their Obamacare tax credits. Such a ruling would make it illegal to sell subsidized Patient Protection and Affordable Care Act (ACA) coverage on the federal healthcare.gov insurance exchange website that runs on an Amazon EC2 cluster. But it will still be legal (read: ACA-compliant) to sell subsidized Obamacare insurance on a state run exchange using the same SaaS exchange application on a separate EC2 cluster.
When the healthcare.gov website debuted two years ago, it was rife with bugs and system problems as was highly publicized at the time. When former U.S. CTO Todd Park was appointed by President Obama to oversee the fix, the site was also redesigned to run on Amazon EC2 clusters as a SaaS application that could be customized and operated by states as independent state exchanges. This enables states that want to keep Obamacare to offer subsidized insurance by moving from the federal exchange to a state-run exchange, like Oregon did with Cover Oregon.
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Healthcare.gov is illegal, argue lawyers for Obamacare’s opponents. Their argument against the Affordable Care Act splits hairs about the law’s construction. The underlying legislation designates federal subsidies to be paid through tax credits to the buyers of health insurance purchased on state-operated exchanges. The ACA is silent about the eligibility for subsidies of purchases on the federally operated exchange healthcare.gov. The plaintiffs argue that the subsidies can’t be given to buyers using the federal exchange healthcare.gov, and only can be given to the buyers using the state exchanges such as Cover Oregon.
A cloud computing alternative
Only 17 states currently operate insurance exchanges. People in the other 34 states will be left without ACA health insurance subsidies if the court rules in King’s favor. According to an article by Larry Levitt of the Kaiser Family Foundation, eligibility for health insurance subsidies would continue in 17 states in the event of the Court decides in favor of King. In the other 34 states, 7.5 million consumers would lose tax subsidies, tripling the cost of their premiums. But the states that lost the subsidies will continue to subsidize the ACA in the 17 eligible states with their federal tax payments.
Any of the 37 states wanting to keep the ACA subsidies for its residents that use the federal healthcare.gov site have a cloud computing alternative. And after all the drama, it’s almost anticlimactic. A state can get a health exchange that complies with the ACA in the same way that many businesses buy IT services…as software as a service (SaaS).
Similar to how sales management can be purchased from Salesforce.com or payroll from Workday.com, states can buy a health insurance exchange as a service. Because of the redesign of healthcare.gov as a SaaS exchange, Arizona, New Mexico and Oregon — according to Aaron Albright spokesman for the Dept. of Health & Human Services — have launched state exchanges using a separate, personalized instance of healthcare.gov running on EC2 clusters that is both ACA compliant and will survive a decision in favor of King. Albright could not confirm at the time of publication how many states were seeking to use the healthcare.gov SaaS to run their exchanges.
Quick, easy…and cheap(er)?
States can use the SaaS healthcare.gov insurance exchange to become operational quickly. States just getting started building an exchange right now have already lost federal subsidies to offset startup costs, but an SaaS exchange offers a low monthly operating expense compared to the large capital cost of building a custom state exchange. Rather than a big up-front capital investment in hardware and software, they simply pay to use a shared cloud computing service.
[Related: Health insurance exchange tech winners and losers]
States can’t just push a button and switch from healthcare.gov to the SaaS version of healthcare.gov though. There’s a bureaucratic, not a technical hurdle: State exchanges are established with a Governor’s executive order or state legislation. States also need to set up administrative functions to approve health plans sold on the state exchange, in addition to performing outreach, providing application assistance, typically in the form of consumer call center.
It took New Mexico about seven months to launch a state exchange using the SaaS partner exchange version of healthcare.gov. Oregon took six months. In the event that the Supreme Court ends subsidized healthcare through the federal exchange, states certainly can’t respond overnight. But it seems reasonable that any state that wants to keep the subsidies could be operational in less than half a year.
There are states that won’t approve state exchanges and governors who have vowed to veto legislation to create exchanges. If the Court rules in favor of King, the states that lose subsidies will subsidize the other 17 state exchanges with federal tax dollars. In response some may opt-in to the partner exchanges.
Sometime this month, the Supreme Court will decide whether or not federal subsidies for health insurance purchased on the healthcare.gov exchange are legal. Circumventing a decision for ACA opponents by running the same software, on the same data, on a separate EC2 cluster under a state’s vanity URL will redefine what it means to split hairs.