Last week’s Supreme Court oral arguments on King v Burwell unfolded as expected.
While all justices must follow the golden rule that a statute cannot be interpreted in isolation but instead must be read in full context, there were dissenting opinions as to whether Congress wrote the law knowing that subsidies are conditional upon state exchange participation, and whether the IRS overstepped their legal bounds by disbursing taxpayer money to insurance companies in 36 federal exchanges without any Congressional authorization whatsoever.
As the arguments commenced, Justice Breyer conceded to the government’s argument that a federal exchange set up by the Department of Health and Human Services (DHHS) stands in the shoes of a state exchange. In the excerpt below, see how Breyer takes the word “such” to mean that an exchange established by a state under section 1311 is really just a term of art:
Justice Breyer: As I read the definitions, there’s a section, Definitions, and it says, quote, The term “Exchange” means, quote, an exchange established under 1311. And 1311 says, An Exchange shall be a government agency, et cetera, that is established by a State. Those are the definitions… So then you look to 1321. And 1321 says, if a State does not set up that Exchange, then the Federal, quote, secretary shall establish and operate such Exchange. So the statute tells the Secretary, set up such Exchange, namely, a 1311 State Exchange.
It’s no surprise that some of the justices perceive that Congress never intended for health insurance subsidies be limited to the five written words: “exchange established by a state.” Without these subsidies, who would visit the federal fallback exchanges?
But Avik Roy, Forbes editor and senior fellow at the Manhattan Institute, points out that subsidies are not the lone ingredient to uphold a federal exchange:
First of all, the argument that havoc and destruction will ensue if subsidies go away is simply factually wrong. There will remain an individual mandate, forcing many people to purchase health coverage regardless of their eligibility for subsidies. It’s true that in a subsidy-free state, average premiums would likely go up, and that fewer people would enroll in Obamacare than originally hoped. But guess what? That has already happened, even with federal exchange subsidies.
Obamacare’s mandates and regulations have already led younger and healthier people to stay away from the exchanges: what wonks call “adverse selection.” Indeed, enrollment in the exchanges has skewed around 25 percent older than one would expect without adverse selection. And underlying premiums have skyrocketed; our Manhattan Institute analysis found that non-group premiums increased by 49 percent in the average county.
