What’s at Stake in the Supreme Court’s Latest Case Considering the Issue of Subsidies in the Affordable Care Act

By Caroline Burstein
February 13, 2015

In less than three weeks (on March 4) the Supreme Court will hear oral arguments in the case of King v. Burwell – with a decision expected in late spring/early summer. Too few people realize how high the stakes are. Before considering the stakes, let’s be sure we understand the fundamental issues.

Simply put, without the legalese, the Supreme Court will hear the claim that federal tax credits – or what is often referred to as “subsidies” – should be available only for health plans sold through insurance exchanges run by the states, not for plans sold through an exchange run by the federal government for the state. Currently there are 37 states that offer health plans using this latter method, commonly called federally-facilitated marketplaces.

Key to understanding the arguments of the plaintiffs – four Virginia residents – is whether the IRS can offer federal tax credits or subsidies to those who purchase health plans through federally-facilitated marketplaces. The plaintiffs contend that the exact language in the Affordable Care Act (ACA) does not allow the IRS to grant tax credits to states that refused to set up their own exchanges. The language at issue is surely a drafting glitch, according to Michael Hiltzik of the Los Angeles Times. To take it literally “would make a hash of the entire law.”

Significantly, the Department of Health and Human Services (HHS) maintains that the ACA does indeed allow for these subsidies, otherwise the entire purpose of the ACA would be frustrated.

In hundreds of previous cases the Supreme Court has deferred to an agency’s reasonable interpretation of the law. The Court, therefore, seems to have a settled approach to statutory interpretation (certainly not constitutional interpretation). Why would this case be any different?

Four former Senate staffers, heavily involved in drafting the law in 2009-10, have recently (February 3, 2015) written an article in Politico that refutes the “language” arguments of the plaintiffs by clearly stating that the federal exchange is the “functional equivalent” of a state exchange in every way.

They and others say that the possibility that residents of states that did not set up their own exchanges would not be entitled to tax credits was never raised during debate on the bill and never part of any version of the ACA. No one in Congress appears to have believed at the time that the law would reject any qualified beneficiaries. If opponents of the law are to be believed, Congress intended to threaten states that did not set up their own marketplaces with a healthcare death spiral, but never communicated this threat. This is patently absurd.

It is not plausible that states would be given a choice to set up an exchange or default to the federal government if it meant that in choosing the second scenario their citizens would lose the right to tax subsidies that enable them to afford insurance. The law says states are given a choice. Did Congress deliberately aim to punish states that didn’t establish their own insurance exchanges? Hardly.

Linda Greenhouse, a lawyer writing in the New York Times on February 5, 2015, clarified for non-lawyers that every justice subscribes to the fact that statutory language has to be understood in context. She quotes statements made by several of the current justices, but the one by Justice Scalia caught my eye: “When we look at a provision of law, we look at the entire provision of law, including later amendments. We try to make sense of the law as a whole.” One cannot expect that an acontextual reading of the law will win the day in the Supreme Court.

Greenhouse mentions a fascinating brief filed in support of the government’s position by 23 attorneys general from states both with and without marketplace exchanges (including the Virginia attorney general’s office) that indicates that the plaintiffs’ side would “violate basic principles of cooperative federalism by surprising the states with a dramatic hidden consequence of their exchange election.”

It’s possible to argue that the language in the ACA statute regarding tax credits is ambiguous, but the foregoing discussion concerning congressional intent, the context of the law, HHS’s interpretation of the ACA, the strong belief that federally-run exchanges serve as surrogates of the state, and the principles of cooperative federalism all indicate that the merits of the case rest with the ACA as implemented.

An article in the New Republic provides some additional fodder for supporters of the ACA. An adverse ruling would cause immense damage to powerful corporate interests (as we’ll see in the next section of this blog) like private insurance companies, hospitals and other stakeholders who oppose the challenge to the law.

Above all, the Roberts Court is a business-friendly court. Roberts has been friendly to the Chamber of Commerce and it would certainly besmirch his reputation if a decision effectively begins a market death-spiral in healthcare. Furthermore, an adverse ruling would be politically damaging to the Republicans who, despite numerous attempts, have never been able to coalesce around an ACA alternative. And Republican legislatures and governors who have not supported the ACA would be likely to feel their residents’ backlash.

Many experts agree that the plaintiffs’ case is quite weak. So, what’s at stake if the decision goes against the ACA? The list is not pretty:

  • If tax credits are rescinded, affordable health insurance for nearly 5 million Americans  (Hiltzik’s estimate, mentioned in the LA Times, but the health law’s 2015 season is still underway) currently receiving subsidies in the 37 affected states would be ended
  • Droves of healthy people would leave HealthCare.gov
  • Americans who have lost their subsidies and are trying to buy individual policies outside the government market would face prices they could not afford
  • Those paying for insurance on their own would face a significant jump in premiums, and this would affect employer-based health insurance as well
  • Women and children who constitute the vast majority of those in the federally-run marketplaces would be disproportionately affected, according to a January 2015 Issue Brief of the National Partnership for Women and Families. The ACA is particularly crucial for women, who tend to live longer, have unique reproductive health needs, and visit their care providers more often, compared to men
  • Florida, Texas, North Carolina, Georgia, Michigan and New Jersey are among the states with the most to lose, but even blue states with their own marketplaces would be affected since many insurance companies are nationwide in scope, according to the PBS NewsHour.

In short, the market for affordable healthcare will spiral downward as more and more people and companies are unable to pay skyrocketing premiums. This describes the very “death spiral” that the ACA was designed to prevent.

For those who enjoy and better identify with “human Interest” stories, the Center for American Progress (CAP) has been releasing a total of nine (one for each justice) stories of real people over the past several weeks. These are people who would be tangibly affected by the King v. Burwell decision. The latest three stories were released on February 11.

NETWORK’s belief is that all people should have access to affordable, quality and comprehensive insurance in order to promote their economic stability and the health of their families. We believe that healthcare is a shared responsibility that is grounded in our common humanity. We acknowledge our enduring responsibility to care for one another and to recognize that we are whole only when the most vulnerable among us is cared for. We are witnessing an attack on a law that goes a long way toward sharing our abundant healthcare resources with millions of people who could not otherwise afford it. We invite everyone to join in prayerful action so that the ACA will be strengthened, not weakened and eventually ruined by the Supreme Court action. As this paper notes, there are many positive signs that justice will prevail.

Leave a Reply

Your email address will not be published.