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March 2, 2015

Wednesday: SCOTUS Challenge Could Render ACA Unworkable In 37 States

King Win Would Exempt Businesses, Middle-Income Earners in Most States From Penalty
 

FOR IMMEDIATE RELEASE: Monday, March 2, 2015

CONTACT: Erin Humiston, (972) 874-5139, or erin@ipi.org

DALLAS -- The U.S. Supreme Court will hear the second biggest legal challenge to Obamacare on Wednesday. And while a win for the plaintiffs in King vs. Burwell won’t kill the law, it could make it largely unworkable in 37 states, said Merrill Matthews, Ph.D., resident scholar with the Institute for Policy Innovation (IPI).

The question in King vs. Burwell is whether the government must abide by the plain language of a law it passed.  In this case, the wording relates to federal subsidies for health insurance in states that did not set up a health insurance exchange, defaulting to the federally created exchange instead. Obamacare specifically states that subsidies that help cover the cost of insurance premiums are only available to individuals who enrolled through a state-created exchange.

“Only 13 states set up their own exchanges,” said Matthews. “The other 37 either didn’t try or failed and so relied on the federal government to do it. The administration has decided to hand out the subsidies to Obamacare enrollees in every state anyway, in complete disregard for the law—hence the legal challenge.”

There are several reasons to think this challenge will succeed, says Matthews.

  • Justices on both sides of the political spectrum have increasingly emphasized that they will not override the clear language of a law, regardless of what Congress intended to do.  
  • Congress frequently uses subsidies to persuade—read, bribe—the states into doing what Washington wants (e.g., highway speed limits and Medicaid expansion).  
  • It is abundantly clear what the Democrats writing the law originally intended thanks to MIT economist Jonathan Gruber, who played a major role in shaping the law as a paid adviser, because he explained to audiences on several occasions that subsidies depended on states creating their own exchanges.

While a Supreme Court victory for King doesn’t eliminate Obamacare and would likely have little impact in the 13 states that created their own exchanges, there would be both positive and negative impacts in the other 37, said Matthews.

“On the plus side, taxpayers would save an estimated $700 billion over a decade from fewer insurance subsidies. And because the insurance mandate depends on subsidies to make coverage ‘affordable,’ (1) businesses in those 37 states that don’t provide coverage would be exempt from the penalty, and (2) most middle-income people would be exempt from having to buy coverage.”

“On the negative side, perhaps several million people could lose their health insurance subsidies and become uninsured,” said Matthews.

“The best solution in light of a King victory would be for Obama to finally sit down with Republicans to hammer out changes that would actually increase access to health care, lower costs and improve quality—all the things Obama promised his law would do but didn’t,” said Matthews.

 

Institute for Policy Innovation (IPI) resident scholar Merrill Matthews, Ph.D. is available for interview by contacting Erin Humiston at (972) 874-5139, or erin@ipi.org


 

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