The Achilles Heel That Could Trip Up Obamacare

The Affordable Care Act (ACA) is burdened with flaws. If the healthier young do not buy insurance, premiums for the old will zoom, causing policy cancellations that drive costs still higher, which will lead to more cancellations and what is referred to as a “death spiral”. Millions of others face cancellation because their coverage fails to meet Obamacare’s minimum standards. There are threats that doctors by the tens of thousands will refuse to treat patients with policies that pay too little. We know about these.

But there is another threat that the media has hardly touched on. The health care act offers subsidies in the form of tax credits to low- and moderate-income Americans to lessen the cost of health insurance to what is hoped to be an affordable level. Working its way through the courts is a suit brought by a group of individuals and businesses from several states who are opposed to Obamacare and believe they have a found a loophole to bring it down.The plaintiffs claim the government cannot issue subsidies through its federal exchange.

The ACA provided that the federal government would take over the job of operating the health care insurance marketplace for any state that did nothing to set up its own. That proved to be 36 states that left the job to Washington. The law states that individuals who buy insurance "through an exchange established by the state" may be eligible for tax credits. The plaintiffs argue that the language is specific and makes no provision authorizing the federal government to issue such subsidies via its exchange.

The suit was brought in May. In late October, the Federal District Court in Washington denied the government's request to dismiss the case based on the government’s argument that the plaintiffs lack “standing” to sue. But the court found that one of the plaintiffs, who runs a sole proprietorship flooring company in West Virginia, does have “standing”. His net income is low enough to exempt him from the requirement to buy insurance under the ACA’s mandate, but the subsidy would put that net income over the threshold, forcing him "to either pay a penalty or purchase more insurance than he wants," in the words of the lawsuit, and he is thus “harmed”.

The court did not accept the plaintiffs' bid for an early injunction that would peremptorily block the government from issuing subsidies. The judge found that to be premature as the plaintiffs had not yet proved they were likely to succeed on their claims.

For its part, the Justice Department argues that the government "stands in the shoes" of states that elected not to conduct their own marketplaces for insurance and that Congress’s intent was to offer the tax credits nationwide. But the DC court leans right, and if the language in the ACA is interpreted literally, the removal of subsidies for residents of almost three-quarters of the states would make insurance prohibitively costly, triggering an uprising that would threaten Obamacare’s continuance.