Exactly what would happen to the Affordable Care Act if the Supreme Court invalidates tax credits in the three dozen states where the federal government runs the program?

Legal scholars say a decision like that would deal a potentially lethal blow to the law because it would undermine the government-run insurance marketplaces that are its backbone, as well as the mandate requiring most Americans to carry coverage.

In King v. Burwell, the law’s challengers argue that Congress intended to limit federal tax credits to residents of states running their own insurance exchanges. Currently only 13 states and the District of Columbia operate exchanges on their own; another 10 are in some sort of partnership with the federal government. Federal officials run the rest.

The court is slated to hear the case in early 2015. Should it find that subsidies in federally run exchanges are not allowed, “I don’t think there are any rosy scenarios,” said Timothy Jost, a law professor at Washington and Lee University and a supporter of the law. “It’s a complete disaster.”

The immediate impact is that the Internal Revenue Service would stop paying subsidies to those in federally run exchanges. In 2014, more than 4.6 million people were getting those subsidies but the number may grow to as many as 13.4 million by 2016, according to the Kaiser Family Foundation, (Kaiser Health News is an editorially independent program of the foundation.)

Most of those who lose subsidies would no longer be required by the “individual mandate” to have insurance, because they would fall into an exemption in the law for those who have to pay more than 8 percent of family income for health insurance premiums.

“Since a lot of people can’t afford insurance without the tax credits, you’re looking at a lot of people shedding coverage,” says Nicholas Bagley, a law professor at the University of Michigan.

Those who hang onto their coverage and pay the entire premium without help “are likely to be sicker on average than the people who shed their coverage because they’re the ones who need insurance the most,” he said.

Indeed, the insurance industry, through its trade group America’s Health Insurance Plans, argued in a legal brief for a related case that the elimination of the federal exchange subsidies could seriously undermine those markets, creating an insurance death spiral.

“When healthy individuals opt out of the individual insurance market, those who are left are, on average, less healthy (and therefore prone to higher-than-average medical expenses),” AHIP said in its brief. “A sicker pool of consumers results in higher premiums, which causes an additional relatively healthy subset of participants to drop out, which in turn results in a further increase in premiums.”

Eliminating subsidies for individuals also would eliminate the so-called “employer mandate” that seeks to require larger firms to provide coverage. That’s because the employer mandate merely requires employers to pay a fine if their employees obtain subsidies on the exchange. If there are no subsidies, there are no employer fines and thus effectively, no mandate.

Meanwhile, says Jost, “hospitals that have started to have some real relief from uncompensated care are right back taking care of uninsured people.” That problem could get worse because some people who had coverage in the old, unreformed individual market might have to drop it due to cost.

So what could be done? Some argue that states that rely on the federal government to run their health exchanges could establish their own marketplaces. But legal experts say that’s problematic as well.

“The practical obstacle is that creating an exchange is not child’s play,” says Bagley. “An exchange has to be a governmental entity or a nonprofit entity. They’ve got to be able to carry out a variety of functions,” including working with consumer assistance groups and overseeing compliance with the law’s requirements.

While some have suggested that states could create a “virtual” exchange on paper and contract with the federal government to run it, Bagley says the law on the subject is pretty explicit. “States would have to do more than just the bare minimum,” he said.

Timing and financing would also pose practical problems. The final deadline for states to apply for federal funding to establish an exchange has passed. And a decision from the Supreme Court is likely to come in late June of next year, which is after another deadline (June 15) for states to use their own funds to establish an exchange in time for the 2015-16 open enrollment season.

The political obstacles are potentially even bigger. In six states, even if a governor wanted to establish an exchange for his or her state, the state legislature has specifically taken that authority away, according to the National Conference of State Legislatures. Georgia became the seventh state earlier this year.

“What that means is that in many of these states that don’t have exchanges, state legislatures will have to get involved,” said Bagley. And many of those legislatures “are full of new members after the mid-term elections who specifically campaigned against the ACA.”

Still, some say the predictions of doom are overblown.

The main thing an anti-subsidy ruling would do is force Congress back onto the playing field to reopen the law, said health economist Tom Miller of the American Enterprise Institute.

“Congress will step in,” he predicts. “We’re going to have the kind of political give and take which was abbreviated and artificially truncated when the law was passed. It’s not a pretty process, but that’s why we have a government and we elect people.”

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

Do it or else. Increasingly, that’s the approach taken by employers who are offering financial incentives for workers to take part in wellness programs that incorporate screenings that measure blood pressure, cholesterol and body mass index, among other things.

The controversial programs are under fire from the Equal Employment Opportunity Commission, which filed suit against Honeywell International in October charging, among other things, that the company’s wellness program isn’t voluntary. It’s the third lawsuit filed by the EEOC in 2014 that takes aim at wellness programs and it highlights a lack of clarity in the standards these programs must meet in order to comply with both the 2010 health law and the landmark Americans with Disabilities Act.

Honeywell, based in Morristown, N.J., recently got a reprieve when a federal district court judge declined to issue a temporary restraining order preventing the company from proceeding with its wellness program incentives next year. But the issue is far from resolved, and the EEOC is continuing its investigations. Meanwhile, business leaders are criticizing the EEOC action, including a recent letter from the Business Roundtable to administration officials expressing “strong disappointment” in the agency’s actions.

In the Honeywell wellness program, employees and their spouses are asked to get blood drawn to test their cholesterol, glucose and nicotine use, as well as have their body mass index and blood pressure measured. If an employee refuses, he’s subject to a $500 surcharge on health insurance and could lose up to $1,500 in Honeywell contributions to his health savings account. He and his spouse are also each subject to a $1,000 tobacco surcharge. That means the worker and his spouse could face a combined $4,000 in potential financial penalties.

“Under the [Americans with Disabilities Act], medical testing of this nature has to be voluntary,” the EEOC said in a press release announcing its request for an injunction. “The employer cannot require it or penalize employees who decide not to go through with it.”

Honeywell sees the situation differently. “Wellness is a win-win,” says Kevin Covert, vice president and deputy general counsel for human resources at Honeywell. In time, the company expects to see lower claims costs while workers avoid health problems. Sixty-one percent of employees who participated in the company’s screening last year reduced at least one health risk, he says.

Further, Covert says, it’s easy for employees and their spouses to avoid the tobacco surcharge. Smokers can take a 15-minute online tobacco cessation course, while non-smokers can simply call up the health plan and certify that they don’t smoke.

“The way they described the program was quite hyperbolic,” Covert says.

Employers are watching the Honeywell case closely because many have similar incentive-based wellness plans, says Seth Perretta, a  partner at Groom Law Group, a Washington, D.C., firm specializing in employee benefits.

Eighty-eight percent of employers with 500 workers or more offer some sort of wellness program, according to a 2014 national survey of employer-sponsored health plans by the benefits consultant Mercer. Of those, 42 percent offer employee incentives to undergo biometric screening, and 23 percent tie incentives to actual results, such as reaching or making progress toward blood pressure or BMI targets.

Despite employers’ enthusiasm for wellness programs, “there’s no good research that shows these programs actually improve health outcomes or lower employer costs,” says JoAnn Volk, a senior research fellow at Georgetown University’s Center on Health Insurance Reforms.

The health law encourages employers to offer workers financial incentives to participate in wellness programs. It allows plans to incorporate wellness incentives — both penalties and rewards — that can total up to 30 percent of the cost of employee-only coverage, an increase over the previous limit of 20 percent. If the wellness activity aims to help someone reduce or quit smoking, the incentive can be even higher, up to 50 percent of the plan’s cost.

Under the ADA, employers aren’t allowed to discriminate against workers based on health status. They can, however, ask workers for details about their health and conduct medical exams as part of a voluntary wellness program. What constitutes a voluntary wellness program under the law? Employers, patient advocates and policy experts want the EEOC to spell out what “voluntary” means under the ADA and clarify the relationship between the  health law and the ADA with respect to wellness program financial incentives.

“The EEOC has chosen litigation over regulation,” says J.D. Piro, a senior vice president at Aon Hewitt, who leads the benefits consultant’s health law group.

The EEOC is always reviewing its guidance, but there’s no timeframe for issuing further guidance, says spokesperson Kimberly Smith-Brown.

Consumer advocates say it’s critical not to confuse incentive programs with comprehensive workplace wellness.

“The incentives are meant to engage employees,” says Laurie Whitsel, director of policy research at the American Heart Association, “but they’re not the comprehensive programming we’d like to see employers offer.” It’s really important to have a culture of health, Whitsel says, including an environment that supports a healthy workplace, from a smoke-free work environment to healthy food in the cafeteria.

Patient advocates voice another concern: That wellness program financial penalties may be so onerous they actually limit people’s access to the medications and primary and preventive care they need to get and stay healthy.

“When penalties become that high, it really is a deterrent to affordable, quality health care,” says Whitsel.

Please contact Kaiser Health News to send comments or ideas for future topics for the Insuring Your Health column.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

35 U.S. hospitals designated as Ebola treatment centers

Efforts to improve patient safety result in 1.3 million fewer patient harms, 50,000 lives saved and $12 billion in health spending avoided

Health care systems experimenting with a new way of being paid by Medicare would have three extra years before they could be punished for poor performance, the federal government proposed Monday.

The proposal is one of dozens of changes that the Centers for Medicare & Medicaid Services wants to make to rules governing accountable care organizations. ACOs are affiliations of doctors, hospitals and other providers that jointly care for Medicare patients with the goal of pocketing a portion of what they save the government. Those that spend above Medicare estimates stand to lose money.

There are more than 330 such networks around the country caring for about 5 million people through the Medicare Shared Savings Program, which includes most of the ACOs. The revisions to the program are intended to entice providers to form new ACOs and to keep existing ones in the program, which is voluntary.

In the first year of the program, 118 ACOs saved Medicare $705 million with about half earning bonuses, government records show.  Another 102 ACOs spent more than Medicare’s benchmark, but only one had to repay Medicare because most ACOs have a three-year grace period when they can earn bonuses but are excused from penalties.

The new rule would give ACOs, both new and existing ones, an extra three years before they faced penalties, for a total of six years. Sean Cavanaugh, Medicare’s director, said the change was one of many prompted by concerns raised by ACOs. “The notion that 36 months later you’re going to be at downside financial risk is pretty intimidating,” he said in an interview.

However, the extra time would come at a price: ACOs that after their first three years decide to avoid penalties for the next three could keep no more than 40 percent of the money they save Medicare, rather than the 50 percent maximum they can keep during their first three years.

The government also proposed creating a new type of ACO for providers that want a chance to earn the biggest savings while also being at risk for repaying the most money if they fell short. Many of those ACOs are now in the so-called Pioneer ACO Model, which ends after 2016. Medicare proposed that those ACOs could move over to the new program, which has similar rules.

The new model, known as “Track Three,” would allow ACOs to keep up to 75 percent of the money they save Medicare. If they cost Medicare extra, those ACOs would be held responsible for up to 15 percent of the excess spending. Currently ACOs cannot be held responsible for more than 10 percent.

The government is also soliciting views on alternative ways of deciding whether an ACO has saved Medicare money. Currently, Medicare estimates what the participants of the ACO spent in the past and uses that as a benchmark.

Some ACOs have complained that providers that are already practicing efficiently are having a harder time producing savings than less efficient ones. Under one option, ACO spending would be compared to the average spent by other doctors and hospitals in the region that are not part of an ACO.

The public has until Feb. 6 to comment on the proposed rule.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

Beginning Dec. 1, seniors living in three states will need prior approval from Medicare before they can get an ambulance to take them to cancer or dialysis treatments.

The change is part of a three-year pilot to combat extraordinarily high rates of fraudulent billing by ambulance companies in Pennsylvania, New Jersey and South Carolina.

The good news is that Medicare beneficiaries in those states will now know beforehand whether the program will cover their non-emergency transportation to treatments. The bad news, say advocates, is that many fragile people will be left with no way to get to appointments that might mean the difference between life and death.

“Often people have to go long distances, they feel lousy when treatment is over, and in some cases, it’s to the point of being dangerous in providing their own transportation,” said Jon Burkhardt, a consultant who has studied transportation for dialysis patients.

The pilot is part of a move by Medicare to require prior approvals for services and equipment associated with a high incidence of fraud, such as wheelchairs, chiropractic visits and plastic surgery. Officials said the three states were selected based on “high utilization and improper payment rates.”

If cost savings are shown, the program is expected to be expanded nationally.

Kate Kraemer, billing manager at Direct Bill Inc., which helps a Pennsylvania ambulance firm collect Medicare payments, said the demonstration will keep dialysis patients from being surprised by bills that are denied weeks after they receive the service. Those bills can range from $150 to $600 per roundtrip for three visits a week, whereas a non-ambulance trip can be as little as $25.

But Kraemer said the project doesn’t do anything about the real problem — patients who don’t qualify for reimbursed transportation, but who do not have friends or family to drive them and are too weak after a three-to-four hour dialysis session to drive themselves. Many cannot afford the cost of any form of transportation.

“They’re … creating a nightmare problem [for] the neediest patients,” Kraemer said.

Since Medicare doesn’t cover non-medical transportation at all, some patients gamble that it will cover use of an ambulance — even when less expensive transportation might be more appropriate.

A 2013 report by the Health and Human Services inspector general found that transports of renal disease patients to dialysis facilities increased by 1,436 percent in Pennsylvania between 2002 and 2011, by 1,129 percent in New Jersey and by 9,659 percent in South Carolina. Those figures compare to national growth rate of 269 percent.

That report didn’t address the issue of fraudulent billing. But a 2010 inspector general report indicated that 20 percent of the agency’s spending on nonemergency ambulance trips were improper because the ambulance company overbilled the program, or transported people who didn’t need or qualify for the service.

For a patient to qualify for transportation to and from treatment under Medicare, they have to require the medical attention an ambulance provides — for instance, be confined to bed or need medical care like intravenous fluids during the trip.

Ambulance providers can make 40 round trips during a 60-day period before having to submit another authorization request.

Medicare doesn’t pay for transportation for people who are simply too weak from treatment to drive themselves. Doctors often try to write orders for patients they think might need the service, though in many cases, the patient doesn’t qualify for that level of care.

“Some patients who need and deserve to get the transports will find them delayed because some will get denied inappropriately,” said John Howley, a New York lawyer who has worked on transportation health care issues. “Some people will get hurt.”

Alaina Macia, the CEO of national transportation provider MTM Inc., based in Lake St. Louis, Mo., said that after the company implemented prior authorizations for people covered by commercial insurers, there were 10 percent to 20 percent fewer trips because people did not qualify.

Marsha Simon, president of health care consulting firm Simon & Co. in Washington, D.C., said the number of people with end-stage renal disease who need dialysis has grown — 116,946 people received the diagnosis in 2010, bringing the total number of patients that year to 594,374. In 1980, about 60,000 people had an ESRD diagnosis.

“If they don’t get to appointments, they’ll end up in the hospital at even greater costs to Medicare,” Simon said. “Virtually none of the claims qualify, but that doesn’t mean they don’t need help getting to and from” appointments.

Transport is available from some local governments, nonprofit groups and dialysis centers for people who don’t qualify for non-emergency ambulance transportation. Most Medicare Advantage plans offer transportation to get to doctor appointments and treatments, but at most, those plans cover only 20 trips a year.

Scott Bogren, communications director of the Community Transportation Association of America, made up of public and private transportation and health entities, said the group will push for a transportation benefit in Medicare as awareness spreads about the costs of chronically ill patients missing critical appointments.

“Our concern for years has been that a lot of trips that aren’t ideally provided in an ambulance are going in an ambulance because there’s no other way to do it,” Bogren said.

“If something requires constant, routine transportation, the concern is that if you’re not Medicaid eligible, how do you make that work?”

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

A surge in health insurer competition appears to be helping restrain premium increases in hundreds of counties next year, with prices dropping in many places where newcomers are offering the least expensive plans, according to a Kaiser Health News analysis of federal premium records.

KHN looked at premiums for the lowest-cost silver plan for a 40-year-old in 34 states where the federal government is running marketplaces for people who do not get coverage through their employers. Consumers have until Feb. 15 to enroll for coverage in 2015, the marketplace’s second year.

The number of insurers offering silver plans, the most popular type of plan in 2014, is increasing in two-thirds of counties, according to the analysis. In counties that are adding at least one insurer next year, premiums for the least expensive silver plan are rising 1 percent on average. Where the number of insurers is not changing, premiums are growing 7 percent on average.

“They are moving in where they see an overpriced area,” said Gerard Anderson, a public health professor at Johns Hopkins University.

In the federal marketplaces, the average county premium for the cheapest silver plan is rising 3 percent, from $266 to $273. But it is the inverse in counties where a new carrier is offering the cheapest plan. In those counties, premiums had been high, averaging $284, but they are dropping by an average of 3 percent, bringing them in line with the national average, the analysis found.

In Clark and Harrison counties in southern Indiana, where only one insurer offered coverage this year, four more are jumping in. Monthly premiums for the cheapest silver plan are decreasing by 25 percent, with 40-year-olds paying $197 for the Ambetter plan from a Medicaid-managed care company, MHS.

“As a direct result of those new players being part of the market, they displaced what had been the lowest-cost silver plan,” said Brian Liechty, an Indiana insurance agent. “So it changed the dynamics.”

In parts of southwest Georgia around Albany, which has only one insurer on the marketplace and is the second most expensive place in the nation to buy coverage this year, one of three new carriers, Coventry Health Care of Georgia, is offering the lowest silver plan. The price in those five counties will decline 21 percent for all ages, down to $363 for a 40-year-old. Still, that premium remains higher than much of the rest of the country.

Joe Antos, an economist at the American Enterprise Institute in Washington, said carriers that avoided the rough first year were able to study what their competitors were offering before jumping in. “This was a bet that paid off,” Antos said.

Many insurers were cautious about widely offering policies in 2014 without a good sense of how much others were charging and how expensive it would be to provide medical services to new customers. UnitedHealthcare, one of the nation’s largest insurers, offered plans in only four marketplaces this year nationwide but says it is selling plans in 23 states in 2015.

United is offering the cheapest silver plans in 9 percent of the counties in the federal marketplace, more than any other company, the analysis shows. The largest 2015 premium decrease in federal marketplaces—28 percent—is occurring in three Mississippi counties where United came in and undercut the monopoly insurer.

Heather Kane, United’s vice president for exchange strategy, said many of United’s plans are HMOs with smaller networks of doctors and hospitals than what United offers through its employer plans. Kane said United structured its new plans after studying which policies from competitors were most popular.

“Consumers voted for affordability,” she said.

In Kansas, a new entrant into counties is a subsidiary of a company already offering plans. BlueCross and BlueShield of Kansas created BlueCross BlueShield Kansas Solutions, a restrictive HMO that will not pay anything for non-emergency medical services outside its service area. This subsidiary is offering the lowest cost plan in 103 Kansas counties.

“In every state it looks like more competition is coming in,” said Bobby Huffaker, CEO of American Exchange, a brokerage based in Chattanooga, Tenn.

Elsewhere, competition is not a guarantee of dropping prices. In four dozen counties where Humana is coming in to offer the lowest-priced silver plan, premiums for those plans average 11 percent higher than what is offered this year.

In Chattanooga, one of the least expensive areas this year, consumers will have to pay 16 percent more for the cheapest silver plan, offered by Community Health Alliance, even though the number of carriers doubled to four. Despite the hike, Chattanooga remains less expensive than average. Elsewhere some counties with a monopoly insurer remain cheaper than counties with two competitors.

Silver plans are popular in part because they offer consumers mid-level premiums with deductibles that are not sky high. They tend to carry annual deductibles of between $1,500 and $5,000 and require insurers to pick up an average of 70 percent of medical costs. The federal government subsidizes premiums for those earning less than four times the nation’s poverty level.

Many consumers will not benefit from the lowest-priced silver plan if they opt to keep what they currently have, because premiums are growing sharply for many of this year’s cheapest plans. Liechty, the Indiana broker, noted that changing can be complicated for consumers, particularly those that want to keep their doctors and hospitals. “Most people,” he said, “don’t want to put themselves in a situation where they have to change plans every year.”

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

About a year ago at a Miami-Dade County school board meeting, superintendent Alberto Carvalho was happy to announce the district and the teacher’s union had just ratified a new contract.

“I believe that this contract honors and dignifies what you do every single day,” he told the school board members. It included bonuses for most teachers and it settled how to handle health care expenses after yet another year of rising costs.

“We know exactly what the district pays out in terms of claims, because we are the insurance company. There’s no profit to be made,” he said.

Like most large employers, the Miami-Dade school district is self-insured. It bears the financial risk of covering its own employees.

The school board’s reaction to the health care costs in the new contract was incredulous. They are an elected board and didn’t look forward to telling the teachers their prices were still going to go up. One board member after another questioned the rise in prices.

“Do we sit with our employees, knowing what their salaries are, and help them carve out the best options insurance-wise?” one asked. “Twenty-seven hundred more for his family’s health — can you comment on that?” asked another. Yet another lamented, “Our employees are tired of hearing about rising health care costs.”

This was not the conversation the superintendent expected.

“I thought we were coming here today [to] first and foremost celebrate something pretty remarkable,” he said.

Now, a year later with another new contract, the school board is still grappling with health care costs. Teacher contributions to insurance will mostly stay the same, but it means the district will absorb another 4 percent increase in costs.

Fedrick Ingram is head of the Miami-Dade County teacher’s union, which represents nearly 15,000 members.

“Our salaries have not gone up in the same way that health care costs have gone up,” he explains. So he’s been urging the school district to figure out where the money is going.

“We have to know who’s driving up costs,” he says. “What’s going to affect the bottom line for our premium costs, and what is actually contributing to that.”

Turns out, that is incredibly difficult to do. But it’s a conversation more businesses should be having, says Uwe Reinhardt of Princeton University.

Businesses and employees need to stop taking for granted that rising health care costs are inevitable because they make tradeoffs, Reinhardt says.

“Employees actually pay for what they think is company-provided insurance, by lower wages,” he says. But it’s so hard to get costs under control because the actual prices are secret.

Self-insured organizations like Miami-Dade County schools have to hire an insurance company to manage the claims process and negotiate rates with hospitals and doctors. But insurers and providers keep the rates secret, even from those employers hiring them.

Carvalho’s right: The district knows exactly what it pays overall for health care claims. What it doesn’t know is how much it’s paying to any one hospital or provider for a given service.

That means it doesn’t know who’s the most expensive provider, or who is the cheapest. That may drive prices higher for employees, Reinhardt says.

“It’s almost like blindfolding people, shoving them into Macy’s and saying, ‘Buy efficiently for a shirt.’ ” Reinhardt says. “Well, you come out with a pair of shorts.”

The school district is subject to the state’s open records laws, but Cigna, the insurance carrier they use for employees, refused to share accounts of what was actually paid out, citing trade secrets. Even though the county school district, which is taxpayer-funded, takes on that risk, it’s not allowed to see the contracted prices.

The district is seeking ways to get around the legal obstacles. It’s planning to shop for a service that can work with its limited claims data and at least figure out average costs. Ideally, district officials say, they’d like to know enough about costs to offer incentives for employees who choose less expensive options.

Until there’s more transparency, Miami-Dade teacher’s union member, Cheryl Collier thinks the situation would offend even her second-graders.

“They would be angry that they are being forced pay for something, not really fully understanding the value of what they’re paying for,” she says.

It’s a lesson the school district and other employers are starting to learn.

This story is part of a partnership that includes WLRN, NPR and Kaiser Health News.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.