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If the Supreme Court Eviscerates Obamacare, Then What?

A look at the havoc the Supreme Court could wreak

Conservatives are elated by the prospect that the Supreme Court may later this month deal a crippling blow to the Affordable Care Act, otherwise known as Obamacare. Michael Greve, once chairman of the Competitive Enterprise Institute, which has funded the legal assault on the Act, put it this way: “This bastard has to be killed as a matter of political hygiene. I don’t care how this

Map shows who runs each
state's exchange. (click image to expand)

is done, whether it’s dismembered, whether we drive a stake through its heart, whether we tar and feather it and drive it out of town, whether we strangle it.”

King v. Burwell is the healthcare law challenge that rests entirely on four words in the 902-page Act — words that, if followed

regardless of the rest of the statute, say that the subsidies that make health insurance affordable to the great majority of new policy holders can only be paid to those who buy insurance through an exchange "established by the State".

But 36 states didn't bother to set up insurance exchanges, leaving the chore to the federal government. If a majority of justices say that the four words predominate, that persons who bought insurance on the federal HealthCare.gov site are ineligible for subsidies, then policies are expected to become too expensive for 8 million very angry people come July, with more to join them as premiums soar out of control.

then what?

The President is probably already carrying around in his breast pocket a single-sentence fix for Congress immediately to pass. But passage would require a suddenly forgiving and charitable outlook from a House of Representatives that has voted over 50 times to repeal the healthcare act in its entirety, and a Senate ruled by a majority leader who has said, "I want to pull this law out, root and branch".

At times it seems that the black robes worn by the justices are more like burkas, shielding them from the actual world. How else could Justice Scalia have such faith in that Congress as to ask Solicitor General Donald Verrilli, who argued for the government in the March hearings, "You really think Congress is just going to sit there while all of these disastrous consequences ensue?". And Justice Alito assumed, "It's not too late for a state to establish an exchange" — in all 36 states evidently and in time for the Court's adverse ruling — "so there would be no harm going forward".

sitting on their hands

The Obama administration's attitude is that, if conservatives want to eviscerate the law, then it's for them to deal with the fallout. Sylvia Burwell, who as Secretary of Health and Human Services is the defendant in King v. Burwell, has said, "We know of no administrative actions that could, and therefore we have no plans that would, undo the massive damage …that would be caused" by a decision against the administration. Besides, were the administration to scurry about, positing solutions, it might work against them because it would say to the Supreme Court that there are viable alternatives, so go do your worst.

Twenty-five days is the traditionally expected time after a court ruling that it is to take effect. It is then that the government would have to stop sending tax credits to the insurance companies, which would begin billing policy holders the full cost. They are for the most part lower- to middle-income families, working part time or full. More than 80% receiving

Death Spiral Defined

As the estimated 8 million drop out of the insurance pool, those who stay in will tend to be the less healthy who need coverage. Insurers will have to raise their rates to pay for the care of these more costly people — one estimate says an increase of 35% in 2016 to begin with — and the higher rates will cause still more to drop away. The so-called "death spiral" is set in motion as the ever rising rates drive out still more policyholders leaving behind all but the sickest and most expensive, causing rates to rise further and still more abandoning insurance. Insurance companies finally pull out of the markets and the exchanges collapse.

"

subsidies fit this profile and for them an outsized medical cost would be devastating. Subsidies pay for an average of 72% of their insurance costs, according to administration officials, meaning that policy costs would almost quadruple if the Court shuts off subsidies. That would set in motion the feared "death spiral" [sidebar] that will collapse the Affordable Care Act.

That is, unless the administration adopts one imaginative strategy put forth by William Baude, an assistant professor of law at the University of Chicago: he suggests the administration "announce that it is complying with the Supreme Court’s judgment — but only with respect to the four plaintiffs who brought the suit". They do not represent anyone other than themselves. Pay them their minuscule damages and be done with it. It took some doing to line up these four. Who else would sue because they had been paid subsidies?

squeeze play

Ironically, it will be Republican governors who will experience the most acute pressure. It is they, holding the governorship in 37 states, who account for most of the 36 states that, in defiance of Obamacare, did not set up exchanges in their states.

The Obama camp will pressure them to do so now, or might devise a dodgy workaround for them to adopt their state's federal exchange as their own, so that it would become eligible to issue subsidies. If they go along, those governors can expect to be pilloried within their party for further embedding the Affordable Care Act. If they don't, they will face the wrath of their irate citizens who, as the consequence of no state exchange, will lose insurance that has become too costly without the subsidies, and face as well the disaster this will be for the insurance markets in their states when all those policies evaporate.

Foreseeing this outcome perhaps explains why 31 of those governors did not file amicus briefs with the Supreme Court urging a decision against the administration. A number did the opposite, asking the High Court to preserve the subsidies their residents get through HealthCare.gov. The Affordable Care Act's Medicaid expansion offers an example of what might be on the horizon. Since 2012 some 28 states have joined new Medicaid. Eight more are considering, even holdout Florida. If the same pattern emerges with states setting up insurance exchanges, Republicans will witness a slow-motion defeat.

replace and repeal

But Congress has other plans. Republicans will spring to action the moment the gavel comes down on a decision that forbids subsidies for insurance bought on federal exchanges. No end of bills await the moment, whether the one by Senators Richard Burr of North Carolina, Utah's Orrin Hatch and Representative Fred Upton of Michigan, or from freshman Senator Ben Sasse of Nebraska or by Ron Johnson, senator from Wisconsin, to select only three.

All plans would extend subsidies into 2017 to avoid voter repercussions of cutting them off before an election year. They would variously offer a permanent program of tax credits (the form that subsidies take) to help pay for insurance, scaled downward as income rises (Burr-Hatch-Upton); block new applicants from receiving subsidies but keep them flowing to current enrollees at current levels until August 2017 and then end them cold turkey (Johnson); or cut them to 65% of current levels and phase them out by 5% a month until they are extinguished (Sasse).

What all have in common is abolishing both the individual mandate that requires individuals to buy insurance or pay penalties, the mandate that requires employers of over 50 people to buy insurance for them, and the federally mandated minimal insurance plans. States would be freed to develop their own reduced criteria to make insurance more affordable. Insurers could compete across state borders.

But all would keep the Obamacare provisions that coverage include family members up to age 26, that insurers must accept applicants with pre-existing conditions, that insurers cannot cancel policies when subscribers fall ill. That led Paul Waldman of the The American Prospect to observe "something remarkable" on Washington Post online, that "for all the claims we'll hear about how it undoes the tyrannical horror of Obamacare, the Republicans’ version of health care reform" is "little more than Obamacare Lite…This tells us that Barack Obama has for all intents and purposes won the health-care argument".

None of the reform plans seem to confront the question of what happens to premiums for the rest if the healthy are free not to buy in. Perhaps inducing the death spiral is the unmentioned intent: eliminate the rules to undermine the tenuous structure crafted to make all the parts of the Affordable Care Act come together to work financially so that eventually the last vestiges of the Obamacare design collapse. Then, once a Republican president is installed come January 2017, with Republican control retained in both houses of Congress, what's left of the Affordable Care Act can finally be repealed.

What will work for the Republicans when these bills come up for a vote is that blame will shift to the President when he vetoes them. They preserve federal subsidies at least for a time and it will now be Obama who will have made insurance unaffordable by refusing any encroachment on his grand healthcare design.

But legislation may never reach that stage. Arch conservatives in groups such as the House Freedom Caucus with over 30 members, fronted by Jim Jordan (R-Oh), simply want the subsidies to end with no soft landing and will work to block passage in the House.

won't happen

But we'll go out on a limb and say that none of the above will happen, that the Supreme Court will vote 6 to 3 that subsidies may be paid to those who buy insurance through the federally managed exchange.

Three — Scalia, Alito and Thomas — will assuredly vote against the administration. Despite Scalia's lecture on the philosophy of "textualism" (see "Will the Supreme Court Cripple Obamacare?"), he and they will fasten on the four little words.

Four — Ginsburg, Breyer, Kagan and Sotomayor — will assuredly vote for the administration's position.

That leaves Kennedy and Roberts. Kennedy surprised listeners in the March hearings with his concerns that there may be constitutional issues in effectively coercing states to set up exchanges else see their citizens lose benefits that will be granted to other states that fall in line. It is hard to see how he can go back on that and explain away those concerns, so our guess is that he will side with the government.

Thus deadlocked at 4 and 4, how will Chief Justice Roberts vote? He might yearn to make amends with the conservative base after letting the individual mandate go forward, classifying it as a "tax", when he could have delivered a death blow to Obamacare, killing it in its crib.

But would he really be so blinkered as to lock onto four words in the text, ignoring the rest of the Act, several sections of which make clear that availability of subsidies for all who qualify economically was the intent? Is that cramped interpretation what he wants as the legacy of the Roberts court?

With the disastrous Citizens United decision already in his record, does he now want to author the chaos that will ensue if four words are allowed to disembowel the healthcare law? Or will he take note of what Judge Andre Davis said to the King attorney in oral arguments before the federal appeals court in Virginia that led to the Supreme Court taking up the case: “You are asking us to kick millions of Americans off health insurance just to save four people a few dollars?”

1 Comment for “If the Supreme Court Eviscerates Obamacare, Then What?”

  1. J. Thomas

    Oh it would just be awful if we lost this plank of the Communist Manifesto which mandates universal health coverage for all. We are so close to implementing all 10 facets of the Manifesto too. After all we have already accomplished graduated income tax, national control of public schools, control of media. It would be a shame to lose ground on our holy quest for man to achieve nirvana on earth!

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