Tags: obamacare | subsidies | supreme | court

Obamacare Subsidies for Millions Hang on Court's View of 'State'

Wednesday, 04 Mar 2015 06:42 AM

(Bloomberg) -- The U.S. Supreme Court is poised to consider the fate of President Barack Obama’s health-care law for the second time in three years, weighing an attack on tax credits designed to help millions of people afford insurance.

An hour-long argument Wednesday in Washington will provide the first real clues about the justices’ views on an appeal by four Virginia residents who would block the subsidies in at least 34 states.

A decision halting the credits might unravel the Affordable Care Act, making other core provisions ineffective and potentially causing the market for individual insurance policies to collapse in much of the country. Hospitals would potentially be left with billions of dollars in unpaid bills.

“This would be the greatest instance of judicial overreach in the modern history of the court,” Senator Chris Murphy, a Democrat from Connecticut, told reporters on Tuesday. The court will rule by the end of June.

The fight centers on a four-word phrase that has become a linchpin of the law. The measure says people qualify for tax credits when they buy insurance on an online marketplace “established by the state.”

The challengers say that phrase means subsidies aren’t available in dozens of states that declined to set up their own exchanges, as the marketplaces are known. Residents of those states instead use the federal healthcare.gov system, and an estimated 7.5 million now receive discounts.

Plain Language

“The ACA plainly limits subsidies to coverage purchased on state-established exchanges,” the group argued in court papers filed by Washington lawyer Michael Carvin, who will argue the case.

The Obama administration is defending an Internal Revenue Service rule that interpreted the law as allowing subsidies nationwide. The administration says the court should look beyond the disputed phrase to the rest of the law and to its broad purpose of providing coverage to uninsured Americans nationwide.

“The act was debated, evaluated, and passed under the universal understanding that tax credits would be available in every state -- including states with federally facilitated exchanges,” U.S. Solicitor General Donald Verrilli argued in court papers.

The hospital and health-insurance industries are backing the administration. That includes HCA Holdings Inc., the hospital chain that is the nation’s largest private health-care provider.

Three years ago a divided Supreme Court upheld the law against a broader challenge, even after arguments suggested that the five Republican appointees were poised to strike down the measure. Chief Justice John Roberts joined the court’s four Democratic appointees -- Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan -- in the majority.

Ripple Effect

Both sides say a ruling limiting tax credits would have a ripple effect. With millions of people unable to afford coverage, the administration says the individual insurance markets will be shaken: Healthy people will forgo the policies and only the sickest and most desperate will buy plans. The Urban Institute estimates premiums ultimately would increase by an average of 35 percent.

Opponents of the law don’t dispute that scenario, though they say the blame would lie with the administration.

“Millions of individuals and families will hit a major roadblock: They’ll be stuck with health insurance designed by Washington, D.C., that they can’t afford,” Republican Representatives John Kline of Minnesota, Paul Ryan of Wisconsin and Fred Upton of Michigan wrote Tuesday in the Wall Street Journal.

A ruling against the administration would also gut the law’s requirement that employers provide insurance to their workers. Penalties on employers for not providing coverage are triggered when their workers receive a subsidy for an Obamacare plan; without subsidies, there’s no penalty.

‘Massive Damage’

The question would then be how federal and state officials respond. The U.S. health secretary, Sylvia Mathews Burwell, said last month that the administration, on its own, would be powerless to undo the “massive damage” of a high court ruling.

If so, the administration would have to find an accommodation with Republicans who have repeatedly sought to repeal the law. Kline, Ryan and Upton said they would push an alternative to give more choices to states and individuals.

Some states would also face new pressure to set up their own exchanges so their residents could continue to collect the tax credits.

Unwanted Insurance

In the Supreme Court case, the four Virginians say they don’t want to buy the insurance required under Obamacare. They say, should the court block the subsidies, they would fall within an exception to the insurance mandate for people who can’t afford coverage.

One lurking issue is whether any of them have suffered the type of legal injury that entitles them to sue.

A federal appeals court upheld the IRS regulation in July on a 3-0 vote.

The justices agreed to hear the case even in the absence of a divide among federal appeals courts -- something that normally is an important factor in deciding whether to take up a case.

Although a different federal appeals court rejected the administration’s approach, a larger panel of judges on that court later agreed to reconsider its case, effectively eliminating the division.

The case is King v. Burwell, 14-114.


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The U.S. Supreme Court is poised to consider the fate of President Barack Obama's health-care law for the second time in three years, weighing an attack on tax credits designed to help millions of people afford insurance.An hour-long argument Wednesday in...
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Wednesday, 04 Mar 2015 06:42 AM
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