Will the Supreme Court Scuttle Obamacare Subsidies? (No. What Can’t Happen, Won’t. )

Not long ago, I ran across a photo of the Supreme Court captioned: “Maybe this will turn out to be . . .  Obamacare’s death panel?”  

The caption refers to the widespread belief that when the Supreme Court rules on the latest challenge to Obamacare (“King vs. Burwell”),  it will strike down most of the government subsidies that have made insurance affordable for so many middle-income and low-income families.  (This lawsuit has been financed by the “Competitive Enterprise Institute,” a libertarian group with long ties to tobacco disinformation campaigns, and more recently, climate change denial. The Koch brothers are among the funders of the institute.)

The Supremes are expected to announce their decision in June. If Obamacare’s opponents prevail, the healthcare.gov system will have no choice but to cut off subsidies for as many as 7.5 million Americans in 34 states, including Texas and Florida, probably within a few weeks after the ruling is announced. The Kaiser Family Foundation has put together an eye-opening map revealing where subsidies are safe, and where they are at risk. 

The plaintiffs’ argument turns on just five words buried in the 900-page Affordable Care Act (ACA). In a paragraph describing the tax credits that will be available to people buying policies in online marketplaces, known as “exchanges” the law describes them as “exchanges established by the state.”

Seizing on that last phrase, the libertarians who masterminded this legal challenge gleefully point out that only 16 states opted to set up their own insurance exchanges. The remainder of the marketplaces were established by the federal government.

Ergo, the plaintiffs’ lawyers conclude, 34 states cannot legally offer subsidies to their citizens!

As a point of fact, if a person reads the entire ACA, he or she will discover that the law also is very clear that, if a state refuses to open an exchange, the federal government will “establish and operate such Exchange within the State.”

                  An Absurd Argument

When the IRS drafted its rules for implementing the ACA it realized that, of course, Congress intended to make subsidies available both in the state and in the federal exchanges.

By fixating on only five words, the plaintiffs’ lawyers ask the Court to ignore the broader goal of the “Patient Protection and Affordable Care Act”: universal healthcare.

As Jeffrey Toobin put it in the New Yorker earlier this month: “the King case is notable mostly for the cynicism at its heart. Instead of grandeur” –which is more typical of cases brought to the highest court in the land– “there is a smallness about this lawsuit.” 

I agree. The plaintiffs are concocting an argument based on semantics, not ideas. It is not that the ideologues bringing this case don’t understand the core mission of the ACA. They do.  They know that the goal is to provide affordable health care to all Americans.

But Obamaca’re opponents are quite coolly and cynically ignoring that mission while plucking a phrase out of the legislation, hoping that, if they sharpen it, by repeating it and  harping on it, they can use it to carve the heart out of Obamacare.

Think about it: if subsidies disappeared in 34 states, millions would no longer be able to afford their insurance. At that point, young healthy Americans would drop their policies, leaving the insurance pool filled with sicker, older patients who felt they had no choice but to buy coverage–even without the government’s help.

In order to pay for their care, insurers would hike premiums, and as rates levitated, more and more healthy customers would cancel their coverage. This in turn would trigger what experts call a “death spiral” as premiums rose to unaffordable heights, and insurers simply stopped offering coverage in many states.

To believe that legislators meant to offer subsidies only to people who happened to live in states that create their own exchanges is to believe that the law was consciously designed to self-destruct.

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