Obamacare

A ruling in the looming case King v. Burwell could wipe out health insurance subsidies for some 3 million Americans in a dozen states that could decide the 2016 election and rely on the federal HealthCare.gov exchange, according to new research by professors Theda Skocpol of Harvard University and Lawrence R. Jacobs of the University of Minnesota.

In Florida, nearly 1.2 million Americans are enrolled in a federal exchange plan as of early 2015. In Ohio, Virginia, Pennsylvania, New Hampshire and North Carolina a total of 1.3 million Americans would lose their plans. Notably, in each of those states the number of federal exchange customers who risk becoming ineligible for subsidies exceeded the 2012 presidential election winner's margin of victory in that state, Skocpol and Jacobs found.

"These are middle income people — making between around $30,000 and $80,000. A lot of them around the median income depend pretty heavily on the subsidies. Many of them are Republican voters," Skocpol said. "And they're not as easily ignored by Republicans as poor people are."

The chart below was made by Skocpol and Jacobs: TPM Scotus

A few caveats. Not every exchange customer receives the premium tax credits but most do — the subsidies cover 76 percent of premiums on average, available to Americans between 133 percent and 400 percent of the federal poverty level. The enrollment numbers could also change between now and June 2015, by when the Supreme Court is expected to issue its ruling.

If the justices scrap the subsidies, Democrats would quickly start banging the drum for fixes. In theory the impact of a Supreme Court ruling can be mooted if every state builds its own "state-based" exchange — the subsidies then wouldn't be restricted for anyone who's currently eligible. But GOP governors and lawmakers are likely to face enormous political pressure from conservatives to resist any fixes, putting them between their base and their constituents.

"We actually think this will create enormous problems first and foremost for Republican governors and for Republicans in Congress," Skocpol said.

Ohio, Wisconsin, and North Carolina have Republican governors. Pennsylvania, Virginia, and New Hampshire have Democratic governors who face Republican legislatures that could block efforts to build state-run exchanges. Governors in Ohio, Iowa, Nevada and Michigan have already expanded Medicaid for low-income residents. They risk facing an unenviable situation where the poor are subsidized but residents earning slightly more are not. Scott Walker

Ironically, the negative consequences of a Supreme Court ruling to restrict the subsidies would be most prevalent in Republican-heavy states, which overwhelmingly refused to build their own exchanges. The 18 states that built their own exchanges lean Democrat or are divided, with the exception of Idaho — they would be unaffected by a Supreme Court decision.

In Congress, Republicans would be hard-pressed to support any improvements to counteract a potential Supreme Court ruling against Obamacare, which many of them are publicly rooting for. The new GOP majorities in the House and Senate are unlikely to support a fix to Obamacare after spending the election cycle attacking the law. Top Republicans met on Thursday to discuss their response, but they don't yet have a contingency plan in place.

"We're obviously doing contingency planning for King v. Burwell," House Ways & Means Chair Paul Ryan (R-WI) told reporters after the meeting. "It would be wrong not to. ... That's something that is an ongoing conversation and we're doing all of our diligence on that."

It'll be rough sailing for Democrats, too. A Supreme Court ruling that guts a centerpiece of President Barack Obama's signature domestic achievement would be a severe blow. The subsidies are a key pillar of Obamacare; without them the individual mandate requiring most Americans to buy insurance is not viable for the many who would not be able to afford it. Insurance companies would face a loss of customers and are already demanding a fix if the Supreme Court invalidates the federal exchange subsidies. For the Obama administration, the implementation fallout threatens to be chaotic.

For the Democratic nominee in 2016, the strategy is clearer: accuse the Supreme Court of making an activist decision to gut Obamacare and propose a tweak to the legislative language to make clear the subsidies are permitted on the federal exchange.

The battle could ultimately turn on whether Republicans devise a viable health care solution of their own and persuade voters it would be better than Obamacare. The optics of a Supreme Court rebuke of Obamacare may be helpful to them. But the task of crafting an alternative to Obamacare has eluded Republicans in Congress, who have failed to coalesce around any plan of their own in the five years since the law was enacted.

In one section the brief quotes the conservative justices acknowledging that the Democratic-led Congress "thought that some States might decline ... to participate in the operation of an exchange." The aim is to rebut the challengers' contention that Congress expected every state to set up an exchange and was blindsided when some three dozen declined to do so.

"First, it was well understood when the Act was passed that some States would not establish Exchanges for themselves. The very fact that the Act provides for federally-facilitated Exchanges demonstrates that “Congress thought that some States might decline * * * to participate in the operation of an exchange.” NFIB v. Sebelius, 132 S. Ct. 2566, 2665 (2012) (Scalia, Kennedy, Thomas, & Alito, JJ., dissenting).

obamacare In a second section of the brief, DOJ quotes the conservatives in NFIB v. Sebelius saying Congress created a "backup scheme" by setting up a federal exchange.

"The linchpin of petitioners’ account is their assertion (Br. 5, 40-41, 43) that Congress assumed every State would establish an Exchange for itself. But the very fact that the Act includes a “backup scheme” in the form of federally-facilitated Exchanges demonstrates that “Congress thought that some States might decline * * * to participate in the operation of an exchange.” NFIB, 132 S. Ct. at 2665 (Scalia, Kennedy, Thomas, & Alito, JJ., dissenting).

In a third section of the brief, DOJ quotes a chunk of the 2012 dissent which suggests that restrictions on the subsidies would reduce the incentives of insurers to sell plans, and individuals to buy plans. As a result, "the exchanges would not operate as Congress intended and may not operate at all."

"Critically, moreover, the Exchanges that Congress directed HHS to set up for States that declined or were unable to do so for themselves would be a futile gesture absent tax credits. “Without the federal subsidies, individuals would lose the main incentive to purchase insurance inside the exchanges,” and insurers would likely “be unwilling to offer insurance inside of exchanges” if they were no longer the exclusive means of reaching subsidized customers. NFIB, 132 S. Ct. at 2674 (Scalia, Kennedy, Thomas, & Alito, JJ., dissenting). “With fewer buyers and even fewer sellers, the exchanges would not operate as Congress intended and may not operate at all.” Ibid.

The government's brief argues that if the challengers are right that Congress purposefully withheld subsidies as a threat to encourage states to set up exchanges, it would make little sense to create a federal exchange that would be "doomed to fail."

Yale law professor Abbe Gluck, who flagged the 2012 dissent in August, said it's important because it validates a core argument of the Obamacare administration.

"The reason the quotes are powerful is that it shows that in 2012, everybody in the nation focusing on the Affordable Care Act read the statute the way the government does," she said. "The goal is not to say 'gotcha.' It's to say 'look, they're saying the statute is crystal clear.' ... The NFIB dissenters understood the statute very well. And they understood the statute to allow [those subsidies]."

Jonathan Adler, an architect of the legal challenge in King, doubted that the administration's citation of the 2012 dissent would impact the case.

"It's more of a cute debater's point than a substantive legal point," he said in an email. "It tells you something about the strength of their case."

Adler pointed to his observation that Scalia tends to takes a "textualist" approach to interpreting laws — one that gives minimal weight to legislative history. For instance, he wrote in UARG v. EPA: "We reaffirm the core administrative-law principle that an agency may not rewrite clear statutory terms to suit its own sense of how the statute should operate."

Legal experts widely expect Republican-appointed Justices Scalia, Samuel Alito and Clarence Thomas to rule against the government, and the four Democratic-appointed justices to validate the IRS rule allowing subsidies on the federal exchange. The question-marks are Chief Justice John Roberts and Justice Anthony Kennedy, whom Supreme Court scholars say have less clear-cut views of statutory construction.

Gluck said that as a litigation strategy, the Obama administration's move is "not that unusual." When trying to appeal to a particular justice, she said, lawyers "often cite cases and language that that particular justices wrote."

Oral arguments are set for March 4, and a decision is expected by the end of June.

Obama Administration SCOTUS Brief in King v Burwell