This morning, the Supreme Court will hear oral arguments in King v Burwell, where the plaintiffs are not seeking to challenge Obamacare, but for the federal health law to operate as written.
As the arguments unfold, you can expect something like this:
The petitioners of King v Burwell rightfully argue that the federal health law expressly limits health insurance subsidies to policies purchased on state-based exchanges, not those purchased through federal marketplaces. To briefly get into the specifics here, section 1311 in the Affordable Care Act refers to state exchanges while section 1321 refers to federal exchanges. Section 1401 details the premium assistance subsidies that will assist individuals living between 100-400% of the federal poverty level (FPL) to purchase health coverage. Section 1401 is expressly written with reference to section 1311 and section 1311 only — i.e. with reference only to state, and not federal, exchanges.
But in May 2012, the IRS unilaterally amended the law to extend subsidies to both state and federal exchanges without congressional authorization. As a result, the plaintiffs contend that the IRS has overstepped its legal bounds since the marketplaces opened for business in October 2013.
The respondents will admit that the idea of federal subsidies being limited to state participation is not absurd. Numerous pieces of proposed legislation and existing laws operate on such economic incentives. For example, Medicaid is a jointly funded program where states must comply by certain maintenance of effort requirements in order to pull down matching federal funds. Moreover, both the Clinton and Nixon administrations’ respective health care reform proposals included federal funds contingent upon state cooperation.
Yet in the case of Obamacare, the government deems subsidy limitation as ridiculous, for Congress would have never wanted to risk having the federal health law fall short of its desired implementation.
Surely the petitioners will pick this argument apart by pointing out that the law’s Medicaid expansion provision posed a greater risk to state cooperation. Despite the fact that this provision was not mandatory, Congress was in for a legal backlash from states once they realized that they would lose all federal Medicaid funds for their traditional medical assistance programs if they opted not to extend benefits to a majority of able-bodied childless adults. The Supreme Court ruled this unconstitutional in 2012.
Ignoring the repetitive written phrase that subsidies are only tied to an exchange "established by the state under section 1311," the respondents have instead squirmed to deem this phrase a term of art that encompasses all types of exchanges. They will further contend that subsidies are the essential ingredient for an exchange to remain viable.
Should the court’s final ruling in June deem subsidy distribution in federal exchanges illegal, what will it mean for North Carolina?
Since these subsidies are tied to the individual mandate along with the bipartisan-panned employer mandate, over 10,000 large employers, 2.5 million employees, and 400,000 individuals in the Tar Heel State could indeed be liberated from these penalties. For example, in a state-based exchange where subsidies are legal, if an employer with 50 or more full time workers does not provide health insurance and one of the employees purchases an exchange plan on his own and qualifies for a subsidy, then the employer is hit with a penalty. Receiving a subsidy triggers a tax on the employer. However, for federal exchange states, the absence of subsidies would eliminate the law’s tax on employers who do not provide health coverage for their workers.
Regardless of the justices’ ruling this June, both Republicans and Democrats need to demonstrate their commitment to making medical care legitimately affordable and accessible for both the insured and uninsured. Congress and state legislators need to focus less on how insurance cards are distributed and more on breaking down the many barriers that prohibit disruptive innovation from spreading in the health care sector.
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