Obamacare Patient Protection and Affordable Care Act (PPACA or ACA) - 2011 Appeals Court Ruling Against the Individual Health Insurance Mandate, Plus Coverage of the Act and Implementation
U.S. Government, U.S. Court of Appeals (11th Circuit)
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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT
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Nos. 11-11021 & 11-11067
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FILED U.S. COURT OF APPEALS ELEVENTH CIRCUIT AUG 12, 2011 JOHN LEY
CLERK
D.C. Docket No. 3:10-cv-00091-RV-EMT
STATE OF FLORIDA, by and through Attorney General, STATE OF SOUTH CAROLINA, by and through Attorney General, STATE OF NEBRASKA, by and through Attorney General, STATE OF TEXAS, by and through Attorney General, STATE OF UTAH, by and through Attorney General, et. al.,
Plaintiffs - Appellees - Cross-Appellants,
versus
UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, SECRETARY OF THE UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, UNITED STATES DEPARTMENT OF THE TREASURY, SECRETARY OF THE UNITED STATES DEPARTMENT OF TREASURY, UNITED STATES DEPARTMENT OF LABOR, SECRETARY OF THE UNITED STATES DEPARTMENT OF LABOR,
Defendants - Appellants - Cross-Appellees.
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Appeals from the United States District Court for the Northern District of Florida
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(August 12, 2011)
Before DUBINA, Chief Judge, and HULL and MARCUS, Circuit Judges. DUBINA, Chief Judge, and HULL, Circuit Judge: (1)
Soon after Congress passed the Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010), amended by Health Care and Education Reconciliation Act of 2010 ("HCERA"), Pub. L. No. 111-152, 124 Stat. 1029 (2010) (the "Act"), the plaintiffs brought this action challenging the Act's constitutionality. The plaintiffs are 26 states, private individuals Mary Brown and Kaj Ahlburg, and the National Federation of Independent Business ("NFIB") (collectively the "plaintiffs"). (2) The defendants are the federal Health and Human Services ("HHS"), Treasury, and Labor Departments and their Secretaries (collectively the "government").
The district court granted summary judgment (1) to the government on the state plaintiffs' claim that the Act's expansion of Medicaid is unconstitutional and (2) to the plaintiffs on their claim that the Act's individual mandate—that
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(1) This opinion was written jointly by Judges Dubina and Hull. Cf. Waters v. Thomas, 46F.3d 1506, 1509 (11th Cir. 1995) (authored by Anderson and Carnes, J.J.) (citing Peek v. Kemp, 784 F.2d 1479 (11th Cir.) (en banc) (authored by Vance and Anderson, J.J.), cert. denied, 479 U.S. 939, 107 S. Ct. 421 (1986)).
(2) The 26 state plaintiffs are Alabama, Alaska, Arizona, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Louisiana, Maine, Michigan, Mississippi, Nebraska, Nevada, North Dakota, Ohio, Pennsylvania, South Carolina, South Dakota, Texas, Utah, Washington, Wisconsin, and Wyoming.
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individuals purchase and continuously maintain health insurance from private companies (3) — is unconstitutional. The district court concluded that the individual mandate exceeded congressional authority under Article I of the Constitution because it was not enacted pursuant to Congress's tax power and it exceeded Congress's power under the Commerce Clause and the Necessary and Proper Clause. The district court also concluded that the individual mandate provision was not severable from the rest of the Act and declared the entire Act invalid.
The government appeals the district court's ruling that the individual mandate is unconstitutional and its severability holding. The state plaintiffs cross-appeal the district court's ruling on their Medicaid expansion claim. For the reasons that follow, we affirm in part and reverse in part. (4)
INTRODUCTION
Legal issues concerning the constitutionality of a legislative act present important but difficult questions for the courts. Here, that importance and
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(3) As explained later, unless the person is covered by a government-funded health program, such as Medicare, Medicaid, and others, the mandate is to purchase insurance from a private insurer.
(4) We review the district court's grant of summary judgment de novo. Sammy's of Mobile, Ltd. v. City of Mobile, 140 F.3d 993, 995 (11th Cir. 1998). We review de novo a constitutional challenge to a statute. United States v. Cunningham, 607 F.3d 1264, 1266 (11th Cir.), cert. denied, 131 S. Ct. 482 (2010).
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difficulty are heightened because (1) the Act itself is 975 pages in the format published in the Public Laws;5 (2) the district court, agreeing with the plaintiffs, held all of the Act was unconstitutional; and (3) on appeal, the government argues all of the Act is constitutional.
We, as all federal courts, must begin with a presumption of constitutionality, meaning that "we invalidate a congressional enactment only upon a plain showing that Congress has exceeded its constitutional bounds." United States v. Morrison, 529 U.S. 598, 607, 120 S. Ct. 1740, 1748 (2000).
As an initial matter, to know whether a legislative act is constitutional requires knowing what is in the Act. Accordingly, our task is to figure out what this sweeping and comprehensive Act actually says and does. To do that, we outline the congressional findings that identify the problems the Act addresses, and the Act's legislative response and overall structure, encompassing nine Titles and hundreds of laws on a diverse array of subjects. Next, we set forth in greater depth the contents of the Act's five components most relevant to this appeal: the insurance industry reforms, the new state-run Exchanges, the individual mandate,
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(5) Pub. L. No. 111-148, 124 Stat. 119 (2010), Pub. L. No. 111-152, 124 Stat. 1029 (2010). Some of the sections of the Act have not yet been codified in the U.S. Code, and for those sections we cite to the future U.S. Code provision, along with the effective date if applicable.
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the employer penalties, and the Medicaid expansion.
After that, we analyze the constitutionality of the Medicaid expansion and explain why we conclude that the Act's Medicaid expansion is constitutional.
We then review the Supreme Court's decisions on Congress's commerce power, discuss the individual mandate—which requires Americans to purchase an expensive product from a private insurance company from birth to death—and explicate how Congress exceeded its commerce power in enacting its individual mandate. We next outline why Congress's tax power does not provide an alternative constitutional basis for upholding this unprecedented individual mandate. Lastly, because of the Supreme Court's strong presumption of severability and as a matter of judicial restraint, we conclude that the individual mandate is severable from the remainder of the Act. Our opinion is organized as follows:
I. STANDING
II. THE ACT
A. Congressional Findings
B. Overall Structure of Nine Titles
C. Terms and Definitions
D. Health Insurance Reforms
E. Health Benefit Exchanges
F. Individual Mandate
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G. Employer Penalty
H. Medicaid Expansion
III. CONSTITUTIONALITY OF MEDICAID EXPANSION
A. History of the Medicaid Program
B. Congress's Power under the Spending Clause
IV. SUPREME COURT'S COMMERCE CLAUSE DECISIONS
V. CONSTITUTIONALITY OF INDIVIDUAL MANDATE UNDER
THE COMMERCE POWER
A. First Principles
B. Dichotomies and Nomenclature
C. Unprecedented Nature of the Individual Mandate
D. Wickard and Aggregation
E. Broad Scope of Congress's Regulation
F. Government's Proposed Limiting Principles
G. Congressional Findings
H. Areas of Traditional State Concern
I. Essential to a Larger Regulatory Scheme J. Conclusion
VI. CONSTITUTIONALITY OF INDIVIDUAL MANDATE UNDER THE TAX POWER
A. Repeated Use of the Term "Penalty" in the Individual Mandate
B. Designation of Numerous Other Provisions in the Act as "Taxes"
C. Legislative History of the Individual Mandate
VII. SEVERABILITY
I. STANDING
As a threshold matter, we consider the government's challenge to the
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plaintiffs' standing to bring this lawsuit. "Article III of the Constitution limits the jurisdiction of federal courts to 'cases' and 'controversies.'" Socialist Workers Party v. Leahy, 145 F.3d 1240, 1244 (11th Cir. 1998) (citations omitted). As we have explained:
The case-or-controversy constraint, in turn, imposes a dual limitation on federal courts commonly referred to as "justiciability." Basically, justiciability doctrine seeks to prevent the federal courts from encroaching on the powers of the other branches of government and to ensure that the courts consider only those matters that are presented in an adversarial context. Because the judiciary is unelected and unrepresentative, the Article III case-or-controversy limitation, as embodied in justiciability doctrine, presents an important restriction on the power of the federal courts.
Id. (citations omitted). Indeed, there are "three strands of justiciability doctrine—standing, ripeness, and mootness—that go to the heart of the Article III case or controversy requirement." Harrell v. The Fla. Bar, 608 F.3d 1241, 1247 (11th Cir. 2010) (quotation marks and alterations omitted).
As for the first strand, "[i]t is by now axiomatic that a plaintiff must have standing to invoke the jurisdiction of the federal courts." KH Outdoor, LLC v. City of Trussville, 458 F.3d 1261, 1266 (11th Cir. 2006). "In essence the question of standing is whether the litigant is entitled to have the court decide the merits of the dispute or of particular issues." Primera Iglesia Bautista Hispana of Boca Raton,
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Inc. v. Broward Cnty., 450 F.3d 1295, 1304 (11th Cir. 2006) (quotation marks omitted). To demonstrate standing, a plaintiff must show that "(1) he has suffered, or imminently will suffer, an injury-in-fact; (2) the injury is fairly traceable to [the statute]; and (3) a favorable judgment is likely to redress the injury." Harrell, 608 F.3d at 1253; see also Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S. Ct. 2130, 2136 (1992). "The plaintiff bears the burden of establishing each of these elements." Elend v. Basham, 471 F.3d 1199, 1206 (11th Cir. 2006). And standing must be established for each claim a plaintiff raises. See Harrell, 608 F.3d at 1253-54. "We review standing determinations de novo." Bochese v. Town of Ponce Inlet, 405 F.3d 964, 975 (11th Cir. 2005).
In fact, "[s]tanding is a threshold jurisdictional question which must be addressed prior to and independent of the merits of a party's claims." Id. at 974 (quotation marks and alteration omitted). And "we are obliged to consider questions of standing regardless of whether the parties have raised them." Id. at 975.
Notably, the government does not contest the standing of the individual plaintiffs or of the NFIB to challenge the individual mandate. In fact, the government expressly concedes that one of the individual plaintiffs—Mary
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Brown—has standing to challenge the individual mandate. See Government's Opening Br. at 6 n.1 ("Defendants do not dispute that plaintiff Brown's challenge to the minimum coverage provision is justiciable."). Nor does the government dispute the state plaintiffs' standing to challenge the Medicaid provisions.
The only question raised by the government is whether the state plaintiffs have standing to challenge the individual mandate. The government claims that the state plaintiffs do not have standing because they are impermissibly suing the government as parens patriae—or as representatives of their citizens—in violation of the rule articulated in Massachusetts v. Mellon, 262 U.S. 447, 485-86, 43 S. Ct. 597, 600 (1923).6 The state plaintiffs respond that they are not in violation of the Mellon rule, but rather have standing to challenge the individual mandate for three independent reasons: first, because the increased enrollment in Medicaid spurred by the individual mandate will cost the states millions of dollars in additional Medicaid funding; second, because they are injured by other provisions of the Act—such as the Medicaid expansion—from which the individual mandate cannot be severed; and finally, because the individual mandate
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(6) In Mellon, the Supreme Court held that states cannot sue the federal government in a representative capacity to protect their citizens from the operation of an allegedly unconstitutional federal law. 262 U.S. at 485-86, 43 S. Ct. at 600. This has come to be known as the Mellon rule.
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intrudes upon their sovereign interest in enacting and enforcing state statutes that shield their citizens from the requirement to purchase health insurance. States' Opening Br. at 67-69.
Although the question of the state plaintiffs' standing to challenge the individual mandate is an interesting and difficult one, in the posture of this case, it is purely academic and one we need not confront today. The law is abundantly clear that so long as at least one plaintiff has standing to raise each claim—as is the case here—we need not address whether the remaining plaintiffs have standing. See, e.g., Watt v. Energy Action Educ. Found., 454 U.S. 151, 160, 102 S. Ct. 205, 212 (1981) ("Because we find California has standing, we do not consider the standing of the other plaintiffs."); Vill. of Arlington Heights v. Metro. Hous. Dev. Corp., 429 U.S. 252, 264 & n.9, 97 S. Ct. 555, 562 & n.9 (1977) ("Because of the presence of this plaintiff, we need not consider whether the other individual and corporate plaintiffs have standing to maintain suit."); ACLU of Fla., Inc. v. Miami-Dade Cnty. Sch. Bd., 557 F.3d 1177, 1195 (11th Cir. 2009) ("Because Balzli has standing to raise those claims, we need not decide whether either of the organizational plaintiffs also has standing to do so."); Jackson v. Okaloosa Cnty., 21 F.3d 1531, 1536 (11th Cir. 1994) ("In order for this court to have jurisdiction over the claims before us, at least one named plaintiff must have standing for each of the claims."); Mountain States Legal Found. v. Glickman, 92 F.3d 1228, 1232 (D.C. Cir. 1996) ("For each claim, if constitutional and prudential standing can be shown for at least one plaintiff, we need not consider the standing of the other plaintiffs to raise that claim."). Because it is beyond dispute that at least one plaintiff has standing to raise each claim here—the individual plaintiffs and the NFIB have standing to challenge the individual mandate, and the state plaintiffs undeniably have standing to challenge the Medicaid provisions—this case is justiciable, and we are permitted, indeed we are obliged, to address the merits of each. Accordingly, we turn to the constitutionality of the Act.
II. THE ACT
A. Congressional Findings
The congressional findings for the Act, including those relating to the individual mandate, are contained in two pages, now codified in 42 U.S.C. § 18091(a)(1)-(3). Approximately 50 million people are uninsured.7 The
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(7) U.S. Census Bureau, P60-238, Income, Poverty, and Health Insurance Coverage in the United States: 2009 23 tbl.8 (2010) (""Census Report"), available at http://www.census.gov/prod/2010pubs/p60-238.pdf. Although the congressional findings do not state the precise number of the uninsured, the parties use the 50 million figure, so we will too. Copies of the Internet materials cited in this opinion are on file in the Clerk's Office. See 11th Cir. R. 36, I.O.P. 10.
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congressional findings focus on these uninsureds, health insurance, and health care. Id.
1. The Uninsured and Cost-Shifting Problems
The congressional findings state that some individuals make "an economic and financial decision to forego health insurance coverage and attempt to self-insure, which increases financial risks to households and medical providers." Id. § 18091(a)(2)(A). In its findings, Congress determined that the decision by the uninsured to forego insurance results in a cost-shifting scenario. Id. § 18091(a)(2)(F).
Congress's findings identify a multi-step process that starts with consumption of health care: (1) some uninsured persons consume health care; (2) some fail to pay the full costs; (3) in turn the unpaid costs of that health care—$43 billion in 2008—are shifted to and spread among medical providers; (4) thereafter medical providers, by imposing higher charges, spread and shift the unpaid costs to private insurance companies; (5) then private insurance companies raise premiums for health policies and shift and spread the unpaid costs to already-insured persons; and (6) consequently already-insured persons suffer higher premiums. Id. § 18091(a)(2). Also, some uninsured persons continue not to buy coverage because of higher premiums. Id.
The findings state that this cost-shifting scenario increases family premiums on average by $1,000 per year. Id. § 18091(a)(2)(F). Although not in the findings, the data show the cost-shifting increases individual premiums on average by $368-410 per year.8 The cost-shifting represents roughly 8% of average premiums.9
In its findings, Congress also points out that national health care spending in 2009 was approximately $2.5 trillion, or 17.6% of the national economy.10 Id. § 18091(a)(2)(B). Thus, the $43 billion in shifted costs represents about 1.7% of total health care expenditures. Of that $2.5 trillion in national health care spending in 2009, federal, state, and local governments paid $1.1 trillion, or 44%.11
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(8) Uncompensated care costs translate into "a surcharge of $368 for individual premiums and a surcharge of $1017 for family premiums in 2008." See Families USA, Hidden Health Tax: Americans Pay a Premium 7 (2009), available at http://familiesusa2.org/assets/pdfs/hidden-health-tax.pdf (cited by both the plaintiffs and the government).
(9) "[A] 'hidden tax' on health insurance accounts for roughly 8% of the average health insurance premium" and "[t]his cost-shift added, on average, $1,100 to each family premium in 2009 and about $410 to an individual premium." Br. of Amici Curiae Am. Ass'n of People with Disabilities, et al., in Support of the Government at 15 (citing Ben Furnas & Peter Harbage, Ctr. for Am. Progress Action Fund, The Cost Shift from the Uninsured 1-2 (2009), available at http://www.americanprogressaction.org/issues/2009/03/pdf/cost_shift.pdf (calculations based on a 2005 analysis by Families USA)).
(10) See Centers for Medicare & Medicaid Services ("CMS"), National Health Expenditure Web Tables tbls.1, 5, 11, available at http://www.cms.gov/NationalHealthExpendData/downloads/tables.pdf (derived from calculations).
11See CMS, National Health Expenditure Web Tables, supra note 10, at tbl.5. The governments' health care spending in 2009 included $503 billion for Medicare and $374 billion for Medicaid and the Children's Health Insurance Program ("CHIP").
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Private insurers still paid for 32% of health care spending in 2009,12 id., through: (1) primarily private employer-based insurance plans, or (2) the private individual insurance market. The private employer-based health system covers 176 million Americans. Id. § 18091(a)(2)(D). The private individual insurance market covers 24.7 million people.13 Undisputedly, "[h]ealth insurance and health care services are a significant part of the national economy." Id. § 18091(a)(2)(B).
2. $90 Billion Private Underwriting Costs Problem
Congress also recognized that many of the uninsured desire insurance but have been denied coverage or cannot afford it. Its findings emphasize the barriers created by private insurers' underwriting practices and related administrative costs. Id. § 18091(a)(2)(J). Private insurers want healthy insureds and try to protect themselves against unhealthy entrants through medical underwriting, especially in the individual market. As a result of medical underwriting, many uninsured Americans—ranging from 9 million to 12.6 million—voluntarily sought
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Projected Medicare spending is $723.1 billion in 2016 and $891.4 billion in 2019. CMS, Nat'l Health Expenditure Projections 2009-2019 tbl.2, available at
http://www.cms.gov/National HealthExpendData/Downloads/NHEProjections2009to2019.pdf.
With the Act's Medicaid expansion and other factors, projected Medicaid and CHIP spending is $737.5 billion in 2016 and $896.2 billion in 2019. Id.
(12) See CMS, National Health Expenditure Web Tables, supra note 10, at tbl.3 (derived from calculations).
(13) See Census Report, supra note 7, at 22-25 & 23 tbl.8 (derived from calculations).
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health coverage in the individual market but were denied coverage, charged a higher premium, or offered only limited coverage that excludes a preexisting condition.14
In its findings, Congress determined that the "[a]dministrative costs for private health insurance" were $90 billion in 2006, comprising "26 to 30 percent of premiums in the current individual and small group markets." Id. The findings state that Congress seeks to create health insurance markets "that do not require underwriting and eliminate its associated administrative costs." Id. The Act requires private insurers to allow all applicants to enroll. 42 U.S.C. § 300gg-1(a). Congress stated that the Act, by eliminating underwriting costs, will lower health insurance premiums. Id.
3. Congress's Solutions
Given the 50 million uninsured, $43 billion in uncompensated costs, and $90 billion in underwriting costs, Congress determined these problems affect the national economy and interstate commerce. Id. § 18091(a)(2). The congressional
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(14) HHS, Coverage Denied: How the Current Health Insurance System Leaves Millions Behind, http://www.healthreform.gov/reports/denied_coverage/index.html (citing Commonwealth Fund Biennial Health Insurance Survey, 2007); Sara R. Collins, et al., The Commonwealth Fund, Help on the Horizon: How the Recession Has Left Millions of Workers Without Health Insurance, and How Health Reform Will Bring Relief xi (2011), available at http://www.commonwealthfund.org/~/media/Files/Surveys/2011/1486_Collins_ help_on_the_horizon_2010_biennial_survey_report_FINAL_31611.pdf.
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findings identify what the Act regulates: (1) the "health insurance market," (2) "how and when health care is paid for," and (3) "when health insurance is purchased." Id. § 18091(a)(2)(A), (H). The findings also state that the Act's reforms will significantly reduce the number of the uninsured and will lower health insurance premiums. Id. § 18091(a)(2)(F).
To reduce the number of the uninsured, the Act employs five main tools: (1) comprehensive insurance industry reforms which alter private insurers' underwriting practices, guarantee issuance of coverage, overhaul their health insurance products, and restrict their premium pricing structure; (2) creation of state-run "Health Benefit Exchanges" as new marketplaces through which individuals, families, and small employers, now pooled together, can competitively purchase the new insurance products and obtain federal tax credits and subsidies to do so; (3) a mandate that individuals must purchase and continuously maintain health insurance or pay annual penalties; (4) penalties on private employers who do not offer at least some type of health plan to their employees; and (5) the expansion of Medicaid eligibility and subsidies.
The Act's Medicaid expansion alone will cover 9 million of the 50 million uninsured by 2014 and 16 million by 2016.15 The Act's health insurance reforms
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(15) CBO's Analysis of the Major Health Care Legislation Enacted in March 2010: Before the Subcomm. on Health of the H. Comm. on Energy & Commerce 112th Cong. 18 tbl.3 (2011)
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remove private insurers' barriers to coverage and restrict their pricing to make coverage accessible to the 9 to 12 million uninsured who were denied coverage or had their preexisting conditions excluded.16 The Act's new Exchanges, with significant federal tax credits and subsidies, are predicted to make insurance available to 9 million in 2014 and 22 million by 2016.17
Congress's findings state that the Act's multiple provisions, combined together:18
(1) "will add millions of new consumers to the health insurance market" and "will increase the number and share of Americans who are insured";
(2) will reduce the number of the uninsured, will broaden the health insurance risk pool to include additional healthy individuals, will increase economies of scale, and will significantly reduce insurance companies' administrative costs, all of which will lower health insurance premiums;
(3) will build upon and strengthen the private employer-based health insurance system, which already covers "176,000,000 Americans"; and\
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(Statement of Douglas Elmendorf, Director, Cong. Budget Office) [hereinafter CBO, Analysis], available at http://www.cbo.gov/ftpdocs/121xx/doc12119/03-30-HealthCareLegislation.pdf.
(16) See HHS, Coverage Denied, and Collins, supra note 14.
(17) CBO, Analysis, supra note 15, at tbl.3.
(18) The congressional findings refer six times to the individual mandate "requirement, together with the other provisions of this Act." 42 U.S.C. § 18091(a)(2)(C), (E), (F), (G), (I), (J).
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(4) will achieve "near-universal" coverage of the uninsured. Id. § 18091(a)(2).
Although the congressional findings summarily refer to "the uninsured," the parties' briefs and the 52 amici briefs contain, and indeed rely on, additional data about the uninsured. Before turning to the Act, we review that data.19
4. Data about the Uninsured and Uncompensated Care
So who are the uninsured? As to health care usage, the uninsured do not fall into a single category. Many of the uninsured do not seek health care each year. Of course, many do. In 2007, 57% of the 40 million uninsured that year used some medical services; in 2008, 56% of the 41 million uninsured that year used some medical services.20
As to medical services, 50% of uninsured people had routine checkups in the past two years; 68% of uninsured people had routine checkups in the past five
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(19) There has been no evidentiary objection by any party to the data and studies cited in the parties' briefs or in any of the amici briefs. In fact, at times the parties cite the same data.
(20) HHS, Agency for Healthcare Research and Quality, Medical Expenditure Panel Survey, Household Component Summary Tables ("MEPS Summary Tables"), Table 1: Total Health Services-Median and Mean Expenses per Person with Expense and Distribution of Expenses by Source of Payment: United States, 2007 & 2008, available at http://www.meps.ahrq.gov/mepsweb/data_stats/quick_tables.jsp (follow "Household Component summary tables" hyperlink; then select 2007 or 2008 for "year" and follow the "search" hyperlink; then follow the hyperlink next to "Table 1").
The Medical Expenditure Panel Survey ("MEPS") is a set of large-scale surveys of families and individuals, their medical providers (including doctors, hospitals, and pharmacies), and employers across the United States. It is conducted under the auspices of HHS.
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years.21 In 2008, the uninsured made more than 20 million visits to emergency rooms,22 and 2.1 million were hospitalized.23 The medical care used by each uninsured person cost about $2,000 on average in 2007, and $1,870 on average in 2008.24
When the uninsured do seek health care, what happens? Some pay in full. Some partially pay. Some pay nothing. Data show the uninsured paid on average 37% of their health care costs out of pocket in 2007, and 46.01% in 2008,25 while
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(21) June E. O'Neill & Dave M. O'Neill, Who Are the Uninsured? An Analysis of America's Uninsured Population, Their Characteristics and Their Health, Emp't Policies Institute, 21 tbl.9 (2009), available at http://epionline.org/studies/oneill_06-2009.pdf.
(22) Br. of Amici Curiae Am. Hosp. Ass'n et al. in Support of the Government at 11 (citing Press Release, HHS, New Data Say Uninsured Account for Nearly One-Fifth of Emergency Room Visits (Jul. 15, 2009), available at http://www.hhs.gov/news/press/2009pres/07/20090715b.html).
(23) In 2008, U.S. hospitals reported more than 2.1 million hospitalizations of the uninsured. Office of the Assistant Sec'y for Planning and Evaluation, HHS, The Value of Health Insurance: Few of the Uninsured Have Adequate Resources to Pay Potential Hospital Bills 5 (2011), available at http://aspe.hhs.gov/health/reports/2011/valueofinsurance/rb.shtml.
(24) MEPS Summary Tables, supra note 20. An Economic Scholars' amici brief, filed in support of the government, states: "The medical care used by each uninsured person costs about $2000 per year, on average." Br. of Amici Curiae Economists in Support of the Government at 16 (citing "Agency for Health Care Quality and Research, Medical Expenditure Panel Survey, Summary Data Tables, Table 1" (see MEPS Summary Tables, supra note 20); Jack Hadley, et al., "Covering the Uninsured in 2008: Current Costs, Sources of Payment, and Incremental Costs," 27(5) Health Affairs W399-415 (2008)).
In contrast, this same amici brief points out: "In 2007, the average person used $6,186 in personal health care services." Id. at 11 (citing "Center for Medicare and Medicaid Services, National Health Expenditure Accounts"); see CMS, National Expenditure Web Tables, supra note 10, at tbl.1.
(25) See MEPS Summary Tables, supra note 20.
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third parties pay another 26% on their behalf.26 Not surprisingly, the poorer uninsured, on average, consume more health care for which they do not pay.27 Even in households at or above the median income level ($41,214) in 2000, the uninsured paid, on average, less than half their medical care costs.28
It is also undisputed that people are uninsured for a wide variety of reasons. The uninsured are spread across different income brackets:
(1) less than $25,000: 15.5 million uninsured, or about 31%;
(2) $25,000 to $49,999: 15.3 million uninsured, or about 30%;
(3) $50,000 to $74,999: 9.4 million uninsured, or about 18%;
(4) $75,000 or more: 10.6 million uninsured, or about 21%.29 As the data show, many of the uninsured have low to moderate incomes and simply cannot afford insurance. Some of the uninsured can afford insurance and tried to obtain it, but were denied coverage based on health status.30 Some are
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(26) See Families USA, Hidden Health Tax, supra note 8, at 2 (cited by both the plaintiffs and the government).
(27) Bradley Herring, The Effect of the Availability of Charity Care to the Uninsured on the Demand for Private Health Insurance, 24 J. Health Econ. 225, 229-31 (2005).
(28) Herring, supra note 27, at 231 ("[T]he median income for all household[s] in the U.S. is roughly 300% of poverty, and the poverty threshold was US$13,738 for a family of three in 2000."); see id. at 230 tbl.1.
(29) See Census Report, supra note 7, at 23 tbl.8.
(30) See HHS, Coverage Denied, and Collins, supra note 14.
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voluntarily uninsured and self-finance because they can pay for their medical care or have modest medical care needs. Some may not have considered the issue. There is no one reason why people are uninsured. It is also not surprising, therefore, that Congress has attacked the uninsured problem through multiple reforms and numerous avenues in the Act that we outline later.
Given these identified problems, congressional findings, and data as background, we now turn to Congress's legislative response in the Act.
B. Overall Structure of Nine Titles
The sweeping and comprehensive nature of the Act is evident from its nine
Titles:
I. Quality, Affordable Health Care for All Americans
II. Role of Public Programs
III. Improving the Quality and Efficiency of Health Care
IV. Prevention of Chronic Disease and Improving Public Health
V. Health Care Workforce
VI. Transparency and Program Integrity
VII. Improving Access to Innovative Medical Therapies
VIII. Community Living Assistance Services and Supports
IX. Revenue Provisions31 The Act's provisions are spread throughout many statutes and different titles in the United States Code. As our Appendix A demonstrates, the Act's nine Titles contain hundreds of new laws about hundreds of different areas of health insurance and health care. Appendix A details most parts of the Act with section numbers. Here, we merely list the broad subject matter in each Title.
Title I contains these four components mentioned earlier: (1) the insurance industry reforms; (2) the new state-run Exchanges; (3) the individual mandate; and (4) the employer penalty. Act §§ 1001-1568. Title II shifts the Act's focus to publicly-funded programs designed to provide health care for the uninsured, such as Medicaid, CHIP, and initiatives under the Indian Health Care Improvement Act. Id. §§ 2001-2955. Title II contains the Medicaid expansion at issue here. Title Il's provisions also create, or expand, other publicly-funded programs. Id.
Title III primarily addresses Medicare. Id. §§ 3001-3602. Title IV concentrates on prevention of illness. Id. §§ 4001-4402. Title V seeks to increase the supply of health care workers through education loans, training grants, and other programs. Id. §§ 5001-5701.
Title VI creates new transparency and anti-fraud requirements for physician-
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(31) There is also a tenth Title dedicated to amendments to these nine Titles.
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owned hospitals participating in Medicare and for nursing facilities participating in Medicare or Medicaid. Id. §§ 6001-6801. Title VI includes the Elder Justice Act, designed to eliminate elder abuse, neglect, and exploitation. Id.
Title VII extends and expands certain drug discounts in health care facilities serving low-income patients. Id. §§ 7001-7103. Title VIII establishes a national, voluntary long-term care insurance program for purchasing community living assistance services and support by persons with functional limitations. Id. §§ 8001-8002. Title IX contains revenue provisions. Id. §§ 9001-9023.
We include Appendix A because it documents (1) the breadth and scope of the Act; (2) the multitudinous reforms enacted to reduce the number of the uninsured; (3) the large number and diverse array of new, or expanded, federally-funded programs, grants, studies, commissions, and councils in the Act; (4) the extensive new federal requirements and regulations on myriad subjects; and (5) how many of the Act's provisions on their face operate separately and independently.
We now examine in depth the five parts of the Act largely designed to reduce the number of the uninsured. Because of the Act's comprehensive and complex regulatory scheme, it is critical to examine what the Act actually does and does not do. We start with some terms and definitions.
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C. Terms and Definitions
The Act regulates three aspects of health insurance: (1) "markets," the outlets where consumers may purchase insurance products; (2) "plans," the insurance products themselves; and (3) "benefits," the health care services or items covered under an insurance plan.
1. Markets
Given its focus on making health insurance available to the uninsured, the Act recognizes and regulates four markets for health insurance products: (1) the "individual market"; (2) the "small group market"; (3) the "large group market"; and (4) the new Exchanges, to be created and run by each state.
The term "individual market" means "the market for health insurance coverage offered to individuals other than in connection with a group health plan." 42 U.S.C. §§ 300gg-91(e)(1)(A), 18024(a)(2).
The term "group market" means "the health insurance market under which individuals obtain health insurance coverage (directly or through any arrangement) on behalf of themselves (and their dependents) through a group health plan maintained by an employer." Id. § 18024(a)(1).
Within the "group market," the Act distinguishes between the "large group market" and the "small group market." The term "large group market" refers to the
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market under which individuals purchase coverage through a group plan of a "large employer." Id. §§ 300gg-91(e)(3), 18024(a)(3). A "large employer" is an employer with over 100 employees. Id. §§ 300gg-91(e)(2), 18024(b)(1).
The term "small group market" refers to the market under which individuals purchase coverage through a group plan of a "small employer," or an employer with no more than 100 employees. Id. §§ 300gg-91(e)(4), (5), 18024(a)(3), (b)(2).
The term "Exchanges" refers to the health benefit exchanges that each state must create and operate.32 Id. § 18031(b). Companies (profit and nonprofit) participating in the Exchanges will offer insurance for purchase by individuals and employees of small employers. See id.; id. § 18042. The uninsured can obtain significant federal tax credits and subsidies through the Exchanges. See 26 U.S.C. § 36B; 42 U.S.C. § 18071. In 2017, the states will have the option to open the Exchanges to large employers. 42 U.S.C. § 18032(f)(2)(B).
2. "Essential Health Benefits Package" Term
Two key terms in the Act are: (1) "essential health benefits package" and (2) "minimum essential coverage." Although they sound similar, each has a different meaning.
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(32) The Act allows a state to opt out of creating and operating an Exchange, in which case the federal government (or a nonprofit contractor) will establish the Exchange. 42 U.S.C. § 18041(c).
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The term "essential health benefits package" refers to the comprehensive benefits package that must be provided by plans in the individual and small group markets by 2014. Id. § 300gg-6(a) (effective Jan. 1, 2014); id. § 18022(a). The Act does not impose the essential health benefits package on plans offered by large group employers to their employees.
An "essential health benefits package" must: (1) provide coverage for the "essential health benefits" described in § 18022(b); (2) limit the insured's cost-sharing, as provided in § 18022(c); and (3) provide "either the bronze, silver, gold, or platinum level of coverage" described in § 18022(d). Id. § 18022(a).
The Act leaves it to HHS to define the term "essential health benefits." Id. § 18022(b). However, that definition of "essential health benefits" must include at least these ten services:
(A) Ambulatory patient services.
(B) Emergency services.
(C) Hospitalization.
(D) Maternity and newborn care.
(E) Mental health and substance use disorder services, including behavioral health treatment.
(F) Prescription drugs.
(G) Rehabilitative and habilitative services and devices.
(H) Laboratory services.
(I) Preventive and wellness services and chronic disease management.
(J) Pediatric services, including oral and vision care.
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Id. § 18022(b)(1).33 The bronze, silver, gold, and platinum levels of coverage reflect the levels of cost-sharing (or actuarial value of benefits) in a plan and do not represent the level or type of services. Id. § 18022(d)(1)-(2). For example, a bronze plan covers 60% of the benefits' costs, and the insured pays 40% out of pocket; a platinum plan covers 90%, with the insured paying 10%. Id. § 18022(d)(1)(A), (D).
3. Individual Mandate's "Minimum Essential Coverage" Term
The Act uses a wholly different term—"minimum essential coverage"—in connection with the individual mandate. "Minimum essential coverage" is the type of plan needed to satisfy the individual mandate. A wide variety of health plans are considered "minimum essential coverage": (1) government-sponsored programs, (2) eligible employer-sponsored health plans, (3) individual market health plans, (4) grandfathered health plans, and (5) health plans that qualify for, and are offered in, a state-run Exchange. 26 U.S.C. § 5000A(a), (f)(1).
Many of these plan types will satisfy the mandate even if they do not have the "essential health benefits package" and regardless of the level of benefits or
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(33) In defining "essential health benefits," HHS must ensure that the scope of essential health benefits is "equal to the scope of benefits provided under a typical employer plan." 42 U.S.C. § 18022(b)(2). HHS must take additional elements into consideration, such as balance among the categories of benefits, discrimination based on age or disability, and the needs of diverse segments of the population. Id. § 18022(b)(4).
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coverage. The requirement of the "essential health benefits package" is directly tied to some of the insurance product reforms, but not the individual mandate.
We turn to the Act's first component: the insurance reforms.
D. Health Insurance Reforms
To reduce the number of the uninsured, the Act heavily regulates private insurers and reforms their health insurance products. We list examples of the major reforms.
1. Guaranteed Issue. Insurers must permit every employer or individual who applies in the individual or group markets to enroll. 42 U.S.C. § 300gg-1(a) (effective Jan. 1, 2014). However, insurers "may restrict enrollment in coverage described [in subsection (a)] to open or special enrollment periods."34 Id. § 300gg-1(b)(1) (effective Jan. 1, 2014).
2. Guaranteed renewability. Insurers in the individual and group markets must renew or continue coverage at the individual or plan sponsor's option in the absence of certain exceptions, such as premium nonpayment, fraud, or the
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(34) The Act directs HHS to promulgate regulations with respect to enrollment periods. 42 U.S.C. § 300gg-1(b)(3) (effective Jan. 1, 2014). Insurers must establish "special enrollment periods for 'qualifying events.'" Id. § 300gg-1(b)(2). "Qualifying events" include, for example: (1) "[t]he death of the covered employee"; (2) "[t]he termination (other than by reason of such employee's gross misconduct), or reduction of hours, of the covered employee's employment"; and (3) "[t]he divorce or legal separation of the covered employee from the employee's spouse." 29 U.S.C. § 1163.
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insurer's discontinuation of coverage in the relevant market. Id. § 300gg-2(b).
3. Waiting periods. Under group health plans, insurers may impose waiting periods of up to 90 days before a potential enrollee is eligible to be covered under the plan. Id. §§ 300gg-7 (effective Jan. 1, 2014), 300gg-3(b)(4). The Act places no limits on insurers' waiting periods for applications in the individual market.
4. Elimination of preexisting conditions limitations. Insurers may no longer deny or limit coverage due to an individual's preexisting medical conditions. The Act prohibits preexisting condition exclusions for children under 19 within six months of the Act's enactment, and eliminates preexisting condition exclusions for adults beginning in 2014.35 Id. § 300gg-3.
5. Prohibition on health status eligibility rules. Insurers may not establish eligibility rules based on any of the health status-related factors listed in the Act.36
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(35) For dates effective as to children and then adults, see Pub. L. No. 111-148, Title I, § 1255 (formerly § 1253), 124 Stat. 162 (2010) (renumbered § 1255 and amended, Pub. L. No. 111-148, Title X, § 10103(e), (f)(1), 124 Stat. 895 (2010), and codified in note to 42 U.S.C. § 300gg-3).
(36) Health status-related factors include:
(1) Health status.
(2) Medical condition (including both physical and mental illnesses).
(3) Claims experience.
(4) Receipt of health care.
(5) Medical history.
(6) Genetic information.
(7) Evidence of insurability (including conditions arising out of acts of domestic violence).
(8) Disability.
(9) Any other health status-related factor determined appropriate by the [HHS]
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Id. § 300gg-4 (effective Jan. 1, 2014).
6. Community rating. In the individual and small group markets and the Exchanges, insurers may vary premium rates only based on (1) whether the plan covers an individual or a family; (2) "rating area"; (3) age (limited to a 3-to-1 ratio); and (4) tobacco use (limited to a 1.5—to— 1 ratio). Id. § 300gg(a)(1). Each state must establish one or more rating areas subject to HHS review. Id. § 300gg(a)(2)(B). This rule prevents insurers from varying premiums within a geographic area based on gender, health status, or other factors.
7. Essential health benefits package. The individual and small group market plans must contain comprehensive coverage known as the "essential health benefits package," defined above. Id. §§ 300gg-6(a) (effective Jan. 1, 2014), 18022(a). The Act does not impose this requirement on large group market plans.37
8. Preventive service coverage. Insurers must provide coverage for certain enumerated preventive health services without any deductibles, copays, or other cost-sharing requirements. Id. § 300gg-13(a).
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Secretary.
42 U.S.C. § 300gg-4(a) (effective Jan. 1, 2014).
(37) Rather, the large group market is subject to only a few coverage-reform requirements that apply broadly to either all insurance plans or group health plans in particular. See Amy Monahan & Daniel Schwarcz, Will Employers Undermine Health Care Reform by Dumping Sick Employees?, 97 Va. L. Rev. 125, 147 (2011).
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9. Dependent coverage. Insurers must allow dependent children to remain on their parents' policies until age 26. Id. § 300gg-14(a).
10. Elimination of annual and lifetime limits. Insurers may no longer establish lifetime dollar limits on essential health benefits. Id. § 300gg-11(a)(1)(A), (b). Insurers may retain annual dollar limits on essential health benefits until 2014.38 Id. § 300gg-11(a).
11. Limits on cost-sharing by insureds. "Cost-sharing"39 includes out-of-pocket "deductibles, coinsurance, copayments, or similar charges" and "qualified medical expenses."40 Id. § 18022(c)(3)(A). Annual cost-sharing limits apply to group health plans, health plans sold in the individual market, and qualified health plans offered through an Exchange.41 Id. §§ 300gg-6(b) (effective Jan. 1, 2014), 18022(a), (c).
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(38) HHS shall determine what restricted annual limits are permitted on the dollar value of essential health benefits until 2014. 42 U.S.C. § 300gg-11(a)(1), (2). "Subsection (a) shall not be construed to prevent a group health plan or health insurance coverage from placing annual or lifetime per beneficiary limits on specific covered benefits that are not essential health benefits . . . ." Id. § 300gg-11(b).
(39) "Cost-sharing" does not include "premiums, balance billing amounts for non-network providers, or spending for non-covered services." 42 U.S.C. § 18022(c)(3)(B).
(40) "Qualified medical expense" is defined in 26 U.S.C. § 223(d)(2).
(41) Annual limits on cost-sharing are equal to the current limits on out-of-pocket spending for high-deductible health plans under the Internal Revenue Code (for 2011, $5,950 for self-only coverage and $11,900 for family coverage), adjusted after 2014 by a "premium adjustment percentage." 42 U.S.C. §§ 300gg-6(b) (effective Jan. 1, 2014), 18022(c)(1); 26 U.S.C. § 223(c)(2)(A)(ii), (g); I.R.S. Pub. 969 (2010), at 3.
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12. Deductibles. Deductibles for any plans offered in the small group market are capped at $2,000 for plans covering single individuals and $4,000 for any other plan, adjusted after 2014. Id. §§ 300gg-6(b) (effective Jan. 1, 2014), 18022(c)(2). The deductible limits do not apply to individual plans or large group plans. See id.
13. Medical loss ratio. Insurers must maintain certain ratios of premium revenue spent on the insureds' medical care versus overhead expenses. Id. § 300gg-18(a), (b)(1). In the large group market, insurers must spend 85% of their premium revenue on patient care and no more than 15% on overhead. Id. § 300gg-18(a), (b)(1)(A)(i). In the individual and small group markets, insurers must spend 80% of their revenue on patient care and no more than 20% on overhead. Id. § 300gg-18(a), (b)(1)(A)(ii). This medical-loss ratio requirement applies to all plans (including grandfathered plans). Id. § 300gg-18(a), (b)(1). Insurers must report to HHS their ratio of incurred claims to earned premiums. Id. § 300gg-18(a).
14. Premium increases. HHS, along with all states, shall annually review "unreasonable" increases in premiums beginning in 2010. Id. § 300gg-94(a)(1). Issuers must justify any unreasonable premium increase. Id. § 300gg-94(a)(2).
15. Prohibition on coverage rescissions. Insurers may not rescind
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coverage except for fraud or intentional misrepresentation of material fact. Id. § 300gg-12.
16. Single risk pool. Insurers must consider all individual-market enrollees in their health plans (except enrollees in grandfathered plans) to be members of a single risk pool (whether enrolled privately or through an Exchange). Id. § 18032(c)(1). Small group market enrollees must be considered in the same risk pool. Id. § 18032(c)(2).
17. Temporary high risk pool program. To cover many of the uninsured immediately, the Act directs HHS to establish a "temporary high risk health insurance pool program" to offer coverage to uninsured individuals with preexisting conditions until the prohibition on preexisting condition exclusions for adults becomes effective in 2014. Id. § 18001(a). The premiums for persons with a preexisting condition remain what a healthy person would pay. Id. §§ 18001(c)(2)(C), 300gg(a)(1). The Act allocates $5 billion to HHS to cover this high-risk pool. When this temporary program ends in 2014, such individuals will be transferred to coverage through an Exchange. Id. § 18001(a)—(d), (g).
18. State regulation maintained. States will license insurers and enforce both federal and state insurance laws. Id. § 18021(a)(1)(C). The Act provides for the continued operation of state regulatory authority, even with respect to
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interstate "health care choice compacts," which enable qualified health plans to be offered in more than one state.42 Id. § 18053(a).
In addition to reforming health insurance products, the Act requires the creation of Exchanges where the uninsured can buy the new products. We examine this second component of the Act, also designed to make insurance more accessible and affordable and thus reduce the number of the uninsured.
E. Health Benefit Exchanges
1. Establishment of State-Run Exchanges
By January 1, 2014, all states must establish "American Health Benefit Exchanges" and "Small Business Health Options Program Exchanges," which are insurance marketplaces where individuals, families, and small employers can shop for the Act's new insurance products. Id. § 18031(b). Consumers can compare prices and buy coverage from one of the Exchange's issuers. Id. § 18031(b), (c). Exchanges centralize information and facilitate the use of the Act's significant federal tax credits and other subsidies to purchase health insurance. See 26 U.S.C.
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(42) Health care choice compacts allow qualified health plans to be offered in the individual markets of multiple states, yet such plans will "only be subject to the laws and regulations of the State in which the plan was written or issued." 42 U.S.C. § 18053(a)(1)(A). The issuer of such qualified health plans offered through health care choice compacts "would continue to be subject to market conduct, unfair trade practices, network adequacy, and consumer protection standards . . . of the State in which the purchaser resides" and "would be required to be licensed in each State in which it offers the plan under the compact." Id. § 18053(a)(1)(B)(i)-(ii).
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§ 36B; 42 U.S.C. §§ 18031, 18071, 18081-83. States may create and run the Exchanges through a governmental or nonprofit entity. 42 U.S.C. § 18031(d)(1).
States may establish regional, interstate, or subsidiary Exchanges. Id. § 18031(f). The federal government will provide funding until January 1, 2015 to establish Exchanges. Id. § 18031(a). Insurers may offer their products inside or outside these Exchanges, or both. Id. § 18032(d).
Importantly, the Exchanges draw upon the states' significant experience regulating the health insurance industry. See id. § 18041. The Act allows states some flexibility in operations and enforcement, though states must either (1) directly adopt the federal requirements set forth by HHS, or (2) adopt state regulations that effectively implement the federal standards, as determined by HHS. Id. § 18041(b). In a subsection entitled, "No interference with State regulatory authority," the Act provides that "[n]othing in this chapter shall be construed to preempt any State law that does not prevent the application of the provisions of this chapter." Id. § 18041(d).
2. Qualified Individuals and Employers in the Exchanges
The Act provides that "qualified individuals" and "qualified employers" may purchase insurance through the Exchanges. Id. § 18031(d)(2). Although
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"qualified individuals" is broadly defined,43 "qualified employers" are initially limited to small employers, but in 2017, states may allow large employers to participate in their Exchanges. Id. § 18032(f)(2)(A), (B). Qualified employers can purchase group plans in or out of Exchanges. Id. § 18032(d)(1).
3. Qualified Health Plans in the Exchanges
The Act prescribes the types of plans available in the Exchanges, known as "qualified health plans." Id. § 18031(d)(2)(B)(i). A "qualified health plan" is a health plan that: (1) is certified as a qualified health plan in each Exchange through which the plan is offered; (2) provides an "essential health benefits package"; and (3) is offered by an issuer that (a) is licensed and in good standing in each state where it offers coverage, and (b) complies with HHS regulations and any requirements of the Exchange. Id. § 18021(a)(1). The issuer must agree, inter alia, to offer at least one plan in the "silver" level and one in the "gold" level in each Exchange in which it participates, as described in § 18022(d). Id. § 18021(a)(1)(C). The issuer must charge the same premium rate regardless of
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(43) A "qualified individual" is a legal resident who (1) seeks to enroll in a "qualified health plan" in the individual market through the Exchange, and (2) resides in the state that established the Exchange. 42 U.S.C. § 18032(f)(1), (3). Prisoners and illegal aliens may not purchase insurance through Exchanges. Id. § 18032(f)(1)(B), (3).
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whether a plan is offered in an Exchange or directly.44 Id.
4. "Essential Health Benefits Package" and Catastrophic Plans
The "essential health benefits package" is required of all qualified health plans sold in the Exchanges. Id. § 18021(a)(1)(B). States may require that a qualified health plan offered in that state cover benefits in addition to "essential health benefits," but the state must defray the costs of additional coverage through payments directly to patients or insurers. Id. § 18031(d)(3)(B).
One significant exception to the "essential health benefits package" requirement is the catastrophic plan in the individual market only. In and outside the Exchanges, insurers may offer catastrophic plans which provide no benefits until a certain level of out-of-pocket costs—$5,950 for self-only coverage and $11,900 for family coverage in 2011—are incurred. Id. § 18022(e); see id. § 18022(c)(1), (e)(1)(B)(i); 26 U.S.C. § 223(c)(2)(A)(ii), (g); I.R.S. Pub. 969 (2010), at 3. The level of out-of-pocket costs is equal to the current limits on out-of-pocket spending for high deductible health plans adjusted after 2014. 42 U.S.C. § 18022(e), (c)(1).
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(44) HHS establishes the criteria for certification of insurance plans as "qualified health plans" and develops a rating system to "rate qualified health plans offered through an Exchange in each benefits level on the basis of the relative quality and price." 42 U.S.C. § 18031(c)(1), (3). States must rate each health plan offered in an Exchange (in accordance with federal standards) and certify health plans as "qualified health plans." See id. § 18031(e).
This catastrophic plan exception applies only if the plan: (1) is sold in the individual market; (2) restricts enrollment to those under age 30 or certain persons exempted from the individual mandate; (3) provides the essential health benefits coverage after the out-of-pocket level is met; and (4) provides coverage for at least three primary care visits. Id. § 18022(e)(1), (2).
5. Federal Premium Tax Credit
To reduce the number of the uninsured, the Act also establishes considerable federal tax credits for individuals and families (1) with household incomes between 1 and 4 times the federal poverty level; (2) who do not receive health insurance through an employer; and (3) who purchase health insurance through an Exchange.45 26 U.S.C. § 36B(a), (b), (c)(1)(A)-(C).
To receive the credit, eligible individuals must enroll in a plan offered
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(45) Specifically, the amount of the federal tax credit for a given month is an amount equal to the lesser of (1) the monthly premiums for the qualified health plan or plans, offered in the individual market through an Exchange, that cover the taxpayer and the members of the taxpayer's household, or (2) the excess of: (a) the monthly premium the taxpayer would be charged for the second lowest-cost silver plan over (b) 1/12 of the taxpayer's yearly household income multiplied by the "applicable percentage," a percentage which ranges from 2.0% to 9.5%, depending on income. 26 U.S.C. § 36B(b)(3)(A)-(C).