As tax season approaches, so does another Supreme Court challenge to the Affordable Care Act (ACA). This time the challenge is focused on the new tax subsidies that many Americans will be filing for in their tax returns this year.
Once again, the fate of the ACA and the subsidies that millions of Americans are now receiving that have made it possible for them to more comfortably afford health insurance, rests on the decision of a highly politicized court, masquerading as an impartial arbiter of the law.
The challenge to the ACA before the Supreme Court in King vs Burwell concerns a technicality in the wording of the law that arose from the extraordinary way that the law had to be passed to overcome partisan deadlock. As passed, the law states that tax credits may be authorized for health insurance purchased through one of the health insurance exchange “established by the state.” However, 36 conservative states chose not to establish their own exchanges in protest of the law and the federal government had to step in and create federally run exchanges for them. In order to still be able to provide the tax credit, the IRS extended the tax credits for insurance purchased through the federally run exchanges – an interpretation that in theory violates the “plain language” of the law. The Supreme Court has been asked to decide whether the IRS’s interpretation allowing the subsidies in states with a federally run Exchange may stand.
Putting specific legal arguments aside, the question before the court is whether to let the subsidies that are assisting millions of Americans afford health insurance coverage stand or to plunge people back into their previously precarious situation. Here I examine the implications if the Supreme Court deems the IRS’s interpretation unconstitutional.
If the Supreme Court decides for a literal interpretation of the law, this decision would only affect states that have chosen not to implement the exchanges themselves. These are overwhelmingly conservative states, many of which have also decided not to implement to the Medicaid expansion after the previous Supreme Court decision made this effectively optional. The failure to expand Medicaid has already left a large technical gap in these states for people who are too poor to be eligible for subsidies on the Exchanges but too “wealthy” or categorically ineligible for Medicaid. Nullifying the subsidies for people purchasing health insurance through the exchanges would basically put these states back at square one and would generate even greater inequality between states that have chosen to cooperate with the law and those that continue to obstinately contest the law.
But interestingly, those who stand to lose most from this decision are not the average citizen, but the insurance companies. Other parts of the ACA that have not yet been challenged include the various regulations that require insurance companies to provide affordable coverage even to individuals with preexisting conditions and prohibits them from substantially changing rates or dropping coverage for individuals with that develop conditions. Now that insurance companies can no longer “cream skim” the healthiest clients, they need to make up the additional cost of these patients by enrolling healthy individuals into their plans. Without subsidies, it is unlikely that insurance companies will be able to attract these “young invincibles” into their plans.
Thus, it will be interesting to see where the court decides to go with its decision. On the one hand, the court let stand the individual mandate, interpreting the tax penalty for not having insurance as a tax and well within the purview of the federal government to assess. On the other hand, the court struck down the Medicaid expansion arguing it was an overly coercive encroachment on state’s rights. Now the challenge to the subsidies hangs by a thread on whether the court takes a literal or flexible interpretation of the letter of the law that takes into account the broader context of the writing of the law.
As with other Supreme Court decisions, it is likely that the court will split down the middle in politicized fashion and the fate of millions of Americans who have newly acquired more affordable coverage will depend on a single swing vote in the court.
No pressure Justice Kennedy…
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