The U.S. Supreme Court will hear the second biggest legal challenge to President Obama’s Affordable Care Act, or Obamacare, on March 4. A decision for the plaintiffs in King vs. Burwell won’t kill the law, but it could make it largely unworkable in 37 states.
The question before the court in King is not a constitutional one, as it was when the court upheld the ACA’s mandate requiring individuals to have health insurance. King only asks whether the government must abide by the plain language of a law it passed. Adhering to what a law says has been particularly difficult for Obama and his administration.
The ACA specifically states that subsidies that help cover the cost of insurance premiums are only available to those who were enrolled “through an exchange established by the State under section 1311 of the Patient Protection and Affordable Care Act.”
That language is important because only 13 states set up their own exchanges. The other 37 either didn’t try or failed and so relied on the federal government to do it.
The Obama administration has decided to hand out the subsidies to every state anyway, in complete disregard for the law—hence the legal challenge. There are several reasons to think this challenge will succeed.
First, both liberal and conservative justices have increasingly emphasized that they will not override the clear language of a law, regardless of what Congress intended to do. For example, liberal Supreme Court Justice Elena Kagan recently wrote, “this court does not revise legislation just because the text as written creates an apparent anomaly as to some subject it does not address.”
Second, Congress frequently uses subsidies to persuade—read, bribe; the states into doing what Washington wants. For example, when Congress wanted states to lower the speed limit to 55 mph, it made federal highway funds conditional on states adopting the lower limit. And the ACA made federal Medicaid funds conditional on states expanding Medicaid—a provision the high court struck down. Obamacare subsidies are no different.
Third, we know what Democrats—since no Republicans voted for Obamacare—really intended because MIT economist Jonathan Gruber, who played a major role in shaping the law as a well-paid adviser, repeatedly claimed in later speeches exactly what King is asserting; that subsidies depended on states creating their own exchanges.
A Supreme Court victory for King doesn’t eliminate Obamacare; nothing would change in those 13 states that created their own state exchanges. But there would be both positive and negative impacts in the other 37.
On the plus side, Oklahoma Attorney General Scott Pruitt, who filed the first state challenge, points out that the federal government—that is taxpayers—would save an estimated $700 billion over a decade because it would be spending less on insurance subsidies.
And because the insurance mandate depends on subsidies to make coverage “affordable,” (1) businesses in those 37 states that don’t provide coverage would be exempt from the penalty, and (2) most middle-income people would be exempt from having to buy coverage.
On the negative side, a new study by the RAND Corp. estimates that some 9.6 million people could lose their subsidized health coverage and become uninsured.
Congress could fix the language problem by passing “technical correction” legislation, a common practice, asserting that all states get exchange subsidies. But that’s very unlikely to happen.
Alternatively, the states that didn’t set up an exchange could do so and the subsidies would start flowing to them—legally.
But the best solution in light of a King victory would be for Obama to finally sit down with Republicans to hammer out changes that would actually increase access to health care, lower costs and improve quality—all the things Obama promised his law would do but didn’t.