Everyone remembers the highly-publicized 2012 challenge to the Affordable Care Act, or "Obamacare," where conservative Chief Justice John Roberts sided with the Supreme Court's liberal wing to creatively uphold the legality of the key domestic policy of President Obama's first term. The Court found that the individual mandate of the ACA is not supported by the Commerce Clause, as most commentators expected, but is constitutional thanks to the Taxing and Spending Clause. Common sense would lead one to believe that the result of National Federation of Independent Business v. Sebelius (2012) was the unambiguous, ultimate, final confirmation of the legality and permanence of Obamacare and an end to Republican attempts to dismantle the law. Yet, during the first week of March 2015, the Supreme Court heard oral arguments in King v Burwell, a second major legal challenge to the law which commentators say, once again, could effectively dismantle the law.
The SCOTUSBlog defines the issue as follows:
"Whether the Internal Revenue Service may permissibly promulgate regulations to extend tax-credit subsidies to coverage purchased through exchanges established by the federal government under Section 1321 of the Patient Protection and Affordable Care Act." [1]
To understand the implications of the issue before the Supreme Court, it is necessary to dissect some of the inner workings of the Affordable Care Act itself. The backbone of Obamacare is the system of online healthcare "exchanges" that would be created where Americans who don't receive health insurance through their employer would go to purchase insurance. The hope was that each state would create and operate its own exchange. The 50 million Americans lacking health insurance would be brought together in the exchanges would expand the risk pools and lead to more competition thus lowering costs of health insurance for everyone.[2] While the law intended for this to be done at the state level, many states, due to technical concerns or outright opposition to the law, opted to let the Federal government run the exchange in place of the state.
In the same section that describes how exchanges should be established, the Affordable Care Act also establishes tax credit subsidies available to those purchasing healthcare through the system. The exact wording is that the subsidies are available to those purchasing healthcare "established by the state."
The issue in King v. Burwell is whether these subsidies can be distributed in states which chose not to establish a state exchange and rely on the federal government to operate its exchange. The first extreme position the Supreme Court could take is interpreting the text strictly which would effectively end subsidies, and much of the substance of the ACA, to people purchasing healthcare from the 37 states that do not operate state exchanges. This ruling would essentially be saying that the Court believes Congress intentionally worded the law to deny subsidies from people in states that use a federal exchange.[3] The other extreme would be for the Court to keep the law completely intact and subsidies would continue. This could be done effectively by the Court finding the plaintiffs do not have standing or by accepting a loose interpretation of the term; an interpretation that is more beneficial to health insurance buyers.
While it is impossible to know the exact effects of a ruling striking down the subsidies, commentators estimate that 8 million people would lose health insurance and millions more would see costs double or triple. Others predict that the spike in prices would send markets into chaos and eventually collapse.[4] One of the main concerns has been the effect striking down the subsidies would have on children who receive healthcare through their parents as proscribed by the Affordable Care Act and would potentially lose their coverage. All of these negative effects would be concentrated among the poor who benefit the most from the subsidies of the ACA.[5]
When considering that the government initially assumed each state would in fact set up its own exchange together with the language of the subsidy clause, there does not seem to be any question that the government would have wanted its subsidies to be extended to all Obamacare exchange participants. However, lawyers and research organizations generally agree that, as worded, the law punishes states that do not establish an exchange system.
Of course, eight million Americans losing health insurance is not a politically beneficial outcome for Republicans or Democrats. One obvious outcome of a ruling striking down the federal subsidies would be many states, burdened by the political reality of forcing their citizens to pay taxes funding Obamacare while not providing the benefit of the law, would set up exchanges thus mitigating the effect. Beyond that, there is already talk of Congressional Republicans seeking to fill the void that such a ruling would leave with their own system restoring some of the subsidies.[6]
Politically of course, the stakes could not be higher for President Obama and the Affordable Care Act. The stakes are similarly high for purchasers of health insurance on one of the federal exchanges. Oral arguments were heard in the first week of March and the Court's ruling is expected June or July. As expected, the decision will likely hinge on the decision of swing-vote Justice Robert Kennedy and, due to his decision in the original ACA case, Chief Justice Roberts.
[1] SCOTUSBlog
[2] Nussbaum. Health Insurance Exchanges. Bloomberg. Mar 4, 2015. Web http://www.bloombergview.com/quicktake/health-insurance-exchanges
[3] Ryan Teague Beckwith. 4 ways the Supreme Court could rule on Obamacare. Time. March 4, 2015. Web
[4] Ian MIllhisher. Republican Governor Says He Wants The Supreme Court Case Against Obamacare To Lose. ThinkProgress. March 16, 2015. Web
[5] Stephen Stromberg. What would happen to children if the Supreme Court dismembers Obamacare. March 17, 2015. Web
[6] Sean Parnell. Supreme Court Hears Obamacare Case. March 18, 2015. Web http://news.heartland.org/newspaper-article/2015/03/26/supreme-court-hears-obamacare-case