Wild card: The courts could abolish the federal exchange
There’s one wild card that could throw all of these projections out the window: the Supreme Court. If you read the text of the Affordable Care Act, the law actually makes no provisions for the delivery of taxpayer-funded subsidies through Obamacare’s federal insurance exchange. Obama’s Treasury Department has elected to ignore this problem and pretend it doesn’t exist. But, typically, the executive branch isn’t allowed to spend hundreds of billions of taxpayer dollars without permission of Congress.
The state of Oklahoma, one of the many states that did not build a federal exchange, is suing the federal government on this point. Michael Cannon of the Cato Institute and Jonathan Adler of Case Western Reserve have been helping to move this case through the courts. If Oklahoma wins at the federal appeals court level, it’s a case that will likely make its way to the Supreme Court.
Chief Justice John Roberts has shown that he’s willing to twist himself into a pretzel to save Obamacare and avoid howls from his left. Odds are that he’d do so again, if the Oklahoma case got to him. But let’s give it a 40 percent chance that he would adhere to the text of the Affordable Care Act and rule that federal exchange subsidies are illegal. What then?
The adverse selection death spiral I pooh-poohed above would become a more serious possibility. Those gaining subsidies on the federal exchanges would have to pay the unsubsidized—higher—price for coverage. Most states would eventually build their own exchanges, but that could take several years.