Sunday, November 9, 2014

The New Affordable Care Act Supreme Court Case: King v. Burwell

The reaction to the Supreme Court’s decision on Friday to take the King v. Burwell case initially elicited cheers from opponents to the Affordable Care Act (“ACA”), mostly Republicans, and fear among supporters of the law, mainly Democrats. The ACA opponents apparently hope that, if they won this case, it would strike a near fatal blow to the ACA; the ACA supporters fear that the ACA opponents may be right.
On reflection, it became clear that this rather simplistic analysis was not correct. For example, Brad DeLong argued in a post on Friday that political realities if the petitioners prevailed would cause some Republican governors and legislators to fix the problem and cause problems for Republican politicians in states that have not agreed to the Medicaid expansion. The reason is that middle class people who have been benefitting from federal subsidies for the health insurance they bought on the federally-run exchange will be mighty upset if those subsidies were taken away. The backlash against the Republican Party could be severe.

By way of background, the King v. Burwell is one of two cases for which decisions at the appellate level were issued this past summer raising the issue of whether people residing in states which opted not to set up their own exchange and who purchase health insurance on the federal exchange are eligible for federal subsidies. In the other case, Halibig v. Burwell, a three-judge panel of the D.C. Circuit agreed with the plaintiffs that the ACA limited subsidies to those who bought health insurance on an exchange run by a state. A little afterwards on the same day as the Halibig decision was announced (July 22, 2014), a Fourth Circuit panel released their decision in King, which reached the opposite conclusion. Subsequently, the Administration asked the entire D.C. Circuit to rehear the Halibig case. Most often requests for en banc hearings are denied, but this one was accepted, thus vacating the initial Halibig decision. In consequence, as it stands, there is currently no split among the circuit courts. At the time that the D.C. Circuit accepted to rehear Halibig, it was widely expected that the panel’s decision would be reversed. Since now the same legal issue as in Halibig is now before the Supreme Court in King, the D.C. Circuit may wait for a decision in the King case before issuing one of its own.
These cases are now being litigated because some lawyers on the right some time ago thought they had found a major flaw in the ACA which they could use to bring it down. They were able to bring the King case because they found Virginia residents who objected to being forced to buy subsidized comprehensive health insurance or pay a penalty. The Fourth Circuit agreed that these individuals had standing to bring the suit. The Fourth Circuit decision explains:

“…Virginia has declined to establish a state-run Exchange and is therefore served by the prominent federally-facilitated Exchange known as Without the premium tax credits, the plaintiffs would be exempt from the individual mandate under the unaffordability exemption. With the credits, however, the reduced costs of the policies available to the plaintiffs subject them to the minimum coverage penalty. According to the plaintiffs, then, as a result of the IRS Rule, they will incur some financial cost because they will be forced either to purchase insurance or pay the individual mandate penalty.”
The plaintiffs’ argue that the plain language of the statute limits subsidies to people who bought insurance on a state exchange. (As an aside, no one disputes that “state” in this context includes the District of Columbia, which has set up an insurance exchange.) Others argue that the specific language in contention is ambiguous when examined in the context of the statute as a whole, and, moreover, it is not what Congress intended. According to Yale law professor Abbe R. Gluck, one does not need to divine Congress’s intent or examine the legislative history of the ACA to come to the conclusion that ACA does not permit federal subsidies on insurance bought on the federal exchange. He argues that interpreting the language of the ACA according to the interpretive methods of the most prominent advocate of “textualism,” Supreme Court Justice Antonin Scalia, leads to the conclusion that the plaintiffs’ arguments are wrong.

If the Supreme Court found in favor of the plaintiffs, there would be severe disruption and confusion in the healthcare insurance market in the 36 states that use the federal health insurance exchange. Given the number of people affected, as well as the insurance industry, the healthcare industry, and employers who do not provide health insurance to all or some of their employees, it seems likely that many state governments would quickly remedy the situation if the U.S. Congress did not do so first. The holdout states would be under immense pressure on the issue, as would Congress.
In a Q and A article in The New York Times, Robert Pear writes that “a legal victory for opponents of the law could be a political gift to Democrats. Republicans would have to explain why they wanted to deprive people of health insurance, and Democrats would have a powerful issue to mobilize support for the law and for their party.” I think this is correct. It does not appear that Republicans who are excited about this case have thought through the political implications if their side should win in the Supreme Court. My guess is that they will luck out and lose the case, but you never know.

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