On March 4, Supreme Court justices attended the oral arguments in the King v. Burwell case, which challenges the right of more than 7 million Americans to benefit from tax credits if they are enrolled in a federally run insurance marketplace, rather than in a state-run one.
When the affordable care act was passed, states had the option either to start their own health insurance exchanges, or let the federal government handle the issue. Only 13 states chose to establish their own insurance marketplaces, 10 of them opted for a mixed partnership; while the rest allowed their citizens to enroll in one of the government-run insurance exchanges.
But since tax credit system is the backbone of the affordable care act, many people fear that removing them from the federally run exchange may have dreadful consequence on our health system and may render Obamacare useless.
A Single Phrase… and a Punctuation Mark
In King v. Burwell, challengers of the law claim that the initial intention of the law’s drafters was to grant access to health-insurance subsidies only to participants in state-run insurance exchanges. They say that the law clearly states that only the residents of the states that established their own exchange are entitled to federal subsidies.
Obamacare opponents based their assumption on a single phrase – “an exchange established by the State” –, which according to their opinion excludes federally run exchanges.
During past debates, congressional representatives argued that King v. Burwell provided a “preposterous misreading” of the lawmakers’ initial intent since there wasn’t any uncertainty that the subsidies applied to federally run insurance marketplaces.
On the other hand, Donald B. Verrilli Jr, who currently serves as Solicitor General, had a hard time when he was asked by Justice Samuel Alito why the Congress used ‘an exchange established by the State,’ rather than using ‘an exchange established under the Act,’ ‘established within the State,’ or other formulations consistent with the rest of the law.
After a brief hesitation, Mr. Verrilli replied that the current phrase doesn’t end with a period so it points at other sections in the act that mention other types of exchanges.
On Wednesday, justices seemed torn about the correct interpretation of the law since they spent about 90 minutes on debates involving that single phrase in the 2010 law. Moreover, justices do not have enough legislative precedents at their disposal to take an informed decision. So they may as well guess what the Congress meant.
Under these conditions, the justices will have to rule whether low-to-medium income people in 37 states may benefit from the federal health-insurance subsidies or not, and potentially leave millions without health coverage.
In 2012, there was another major case related to Obamacare in which Supreme Court justices ruled that the individual mandate was not unconstitutional, but overruled the requirement that states should expand Medicaid. The U.S. Supreme Court also ruled last year that corporations aren’t compelled to cover some contraceptive costs for their employees. A final decision in that case is expected this summer.
On Wednesday, four of the six justices were clearly for the interpretation favored by the Obama administration which said that subsidies apply to everyone regardless of the type of health insurance exchange used when buying their insurance plans.
Nevertheless, the position of two other justices is currently unclear, while Chief Justice John Roberts, who rescued Obamacare three years ago, remained disturbingly silent. On Wednesday, Mr. Roberts intervened very few times and didn’t give a clue on what his future decision may be.
The Insurance “Death Spiral”
Justice Sonia Sotomayor argued that if the court fails to rule that people involved in federally run exchanges also may benefit from subsidies, we are going to see “the death spiral” that Obamacare planned to avoid.
Justice Sotomayor was probably referring to the dreadful consequences the elimination of the subsidies may have on millions of low income families. In 2014, more than 4.5 million Americans received the subsidies, while 8.8 million more were expected to benefit from the federal help by 2016.
Most of the people who will lose subsidies will fall into an Obamacare exemption which states that people who pay more than 8 percent of the household income for health insurance do not have to get insurance.
“Since a lot of people can’t afford insurance without the tax credits, you’re looking at a lot of people shedding coverage,”
explained Nicholas Bagley, a law expert.
Mr. Bagley also said that people who would leave the system were people without health problems, while those who would remain were likely to be sicker and require higher-than-usual medical expenses. This will translate into higher premiums which will push other participants to leave, which will result in even higher premiums.
On the other hand, justice Sotomayor also argued that it would be unconstitutional for Congress to force states to run their own health insurance exchanges to avoid the insurance death spiral within their borders.
And Justice Anthony M. Kennedy, former challenger of Obamacare whose opinion on this case is still veiled, expressed the same conclusion. He said that “there’s a serious constitutional problem” if the law means that states should design their own exchanges or their citizens won’t have access to federal subsidies.
His words were widely interpreted that he would embrace Obama administration’s vision, but it is impossible to tell what a justice decision will be in a case just from his/her oral statements. All in all, many people believe that Justice Kennedy may cast the decisive vote on King v. Burwell.
Elena Kagan, another justice, said that it would be odd for Congress to put such heavy burdens on states without clearly mentioning the consequences.
Mr. Verrilli took an ambiguous stance about the constitutional argument, claiming that it would be a “novel” to the case.
Americans Should Have Options
On the other hand, two justices have original opinions. Justice Ruth Bader Ginsburg, for instance, thinks that the plaintiffs don’t have standing for the case since they weren’t hurt when they were offered subsidies.
But the four plaintiffs initially filed the lawsuit with a state court from Virginia, which doesn’t have a state-run insurance exchange, because the subsidies forced them to buy insurance under the law’s “individual mandate”.
Pam Trainor Hurst, spouse of one of the plaintiffs told reporters after this Wednesday’s hearing that both she and her husband had to buy insurance they didn’t want otherwise face penalties.
“We want Americans to have options. […] there is no reason to force millions of us to pay tax penalties if we don’t join a government program,”
Mrs. Hurst concluded.
Surprisingly, even the Obama administration rejected the lack of case standing idea.
We’re Running Out of Time
Justice Alito believes that the whole dispute will be settled if the court delays the ruling and let Congress explain the law. He also suggested, in case subsidies get rejected, that the court give states time to establish their own exchanges.
But that raises a cohort of practical problems because the deadline for states to request federal money to set up their own exchanges has passed. Also, the final ruling of the Supreme Court is scheduled for late June, 2016, while June 15 is another deadline for states to open up an exchange with their own money.
Wednesday Mr. Verrilli also argued in court that millions of people could lose coverage since states wouldn’t have enough time to open their own exchanges to ensure the inflow of subsidies to their residents.
Nancy Pelosi, Democratic leader who was speaker of the House when the law was passed, described King v. Burwell as “politically motivated” because Congress intended that all citizens, regardless of the type of exchange, benefit from the federal subsidies.
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