This spring, the Supreme Court will hear the latest challenge to the Affordable Care Act, in King v. Burwell. The case is about whether...

This spring, the Supreme Court will hear the latest challenge to the Affordable Care Act, in King v. Burwell. The case is about whether the federal government can give subsidies to people who obtain health insurance on an exchange operated by the federal government in a state that has declined to set up its own exchange.

Erin C. Fuse Brown

Erin C. Fuse Brown

The legal question involves a provision of the ACA that provides tax subsidies to people who purchase insurance through an “Exchange established by the State.” Challengers argue this means subsidies are not permitted in states where the federal government operates the insurance exchange because the state has declined to do so.

The five words, in a vacuum, suggest only those in state-established exchanges are eligible for subsidies. But the rest of the ACA has several provisions that would be rendered absurd or meaningless if those in federal exchanges could not receive subsidies.

Moreover, the whole purpose of the ACA would be undercut, because suddenly millions of people whom the ACA was supposed to cover would effectively lose their health insurance. The current interpretation by the IRS makes subsidies available on both state and federal exchanges, which is what Congress almost certainly intended the law to do.

The question for the Supreme Court is whether it will defer to the IRS interpretation of Congress’ intent and let the subsidies stand, or strike it down and cut off subsidies for the millions of Americans who receive subsidies to purchase their insurance on a federal exchange.

What’s at stake in Georgia?

Georgia does not operate its own exchange, and an estimated 784,000 people in Georgia would lose their subsidies if the Supreme Court rules for the challengers. For most of these people who make between 100 percent and 400 percent of the federal poverty level, health insurance would become unaffordable and they would likely lose their coverage.

Those who lose subsidies in Georgia would not be subject to the individual mandate to buy health insurance, and employers in Georgia would not be subject to the employer mandate to provide coverage. But in addition to losing their subsidies going forward, individuals who received federal subsidies my face some unfortunate tax consequences. Tax law scholar Andy Grewal cautions that those who received subsidies to purchase federal exchange coverage in this 2014-2015 coverage year may have to pay back those subsidies if the court strikes down the federal subsidies.

A decision against the government would also destabilize the health insurance market. Those who continue to purchase coverage without subsidies will likely be sicker than those who drop coverage. When healthier people drop out of the insurance market, this drives up premiums and leads to what is known as a health insurance death spiral.

Hospitals and other medical providers, too, will be pinched as individuals lose their health insurance. Hospitals and providers were just starting to see their uncompensated care figures improve as more people gained coverage under the ACA. This trend will reverse if people lose insurance coverage due to the loss of subsidies.

What can be done?

If the Supreme Court rules that there are no subsidies available on the federal exchanges, there are two potential routes to avoid these negative effects, but both are politically fraught.

First, Congress could pass a simple, technical correction to the ACA to allow subsidies on the state or federal exchanges. The incoming Congress, however, is unlikely to do anything to fix Obamacare, and there appears to be no political will even for such a small correction.

Second, states like Georgia with federally operated exchanges could take steps to establish a state exchange, perhaps even continuing to use the federal exchange as a technological backbone. There are questions of just how much a state would have to do to establish its own exchange, but whether the action is symbolic or substantive, the difficulty is political, not technological. In 2014, Georgia became one of seven states that have made a workaround even more difficult by legislatively prohibiting the state from establishing its own exchange.

Thus, for states like Georgia, a Supreme Court decision that strikes down federal exchange subsidies would have grievous consequences for patients, providers, and the stability and affordability of health insurance.

What’s at stake for Supreme Court?

 

If the court takes this opportunity to gut the ACA, it does so at the cost of the principle of separation of powers and the Supreme Court’s institutional legitimacy and credibility.

The question in King will be resolved under the framework developed by the Supreme Court in its famous Chevron v. Natural Resources Defense Council case. That case provides that if a statutory provision is ambiguous, then the court must defer to the agency’s interpretation, so long as it is permissible. The notion of “Chevron deference” is rooted in our constitutional principle of separation of powers. Such judicial deference gives agencies primary responsibility for the policy judgments inherent in statutory interpretation and prevents unelected judges from infusing their political preferences into the policymaking process.

It would be a paradigmatic form of judicial activism for the Supreme Court to dismantle the core of a duly passed, constitutional statute by Congress. Such action would create the specter of a Supreme Court that engages in an elaborate game of “gotcha” with Congress, using the slightest textual inconsistencies as a sword to unwind entire statutory schemes. In so doing, the court would send a dangerous message: Congress can make no error in drafting its laws or else a majority of justices with a jaundiced eye toward the statutory policy will seize on the slightest textual inconsistency to bring the statute down.

King is a simple Chevron case requiring judicial restraint and deference. If it rules otherwise, the court does harm not just to the ACA, the millions of Americans depending on the subsidies to obtain health coverage, the health insurance market and health care providers, but also to the principles of separation of powers that counsel against judicial policymaking, and to the institutional legitimacy of the Supreme Court.

 

Erin C. Fuse Brown, JD, MPH, is an assistant professor of law at Georgia State University’s College of Law and a faculty member of GSU’s Center for Law, Health & Society. She teaches and researches in the areas of health law and policy and administrative law.   

 

 


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