As the Supreme Court prepares to unveil its decision on King v. Burwell, which could gut health care subsidies to millions of Americans on the exchanges–a point that some in the media say could harm Republicans. Hence, why some on the Hill are saying they might temporarily extend those subsidies if the Court nixes them. King is similar to another case–Halbig V. Burwell–that virtually argued the same thing:
Whether the Internal Revenue Service may permissibly promulgate regulations to extend tax-credit subsidies to coverage purchased through exchanges established by the federal government under Section 1321 of the Patient Protection and Affordable Care Act.
Last summer, George Washington University law professor Jonathan Turley and the Washington Examiner’s Philip Klein outlined the background for the case–and the consequences if the Court rules that the IRS does not have the authority to extend those subsidies.
The Halbig case challenges the massive federal subsidies in the form of tax credits made available to people with financial need who enroll in the program. In crafting the act, Congress created incentives for states to set up health insurance exchanges and disincentives for them to opt out. The law, for example, made the subsidies available only to those enrolled in insurance plans through exchanges “established by the state.”
But despite that carrot — and to the great surprise of the administration — some 34 states opted not to establish their own exchanges, leaving it to the federal government to do so. This left the White House with a dilemma: If only those enrollees in states that created exchanges were eligible for subsidies, a huge pool of people would be unable to afford coverage, and the entire program would be in danger of collapse.
Indeed, the Halbig plaintiffs — individuals and small businesses in six states that didn’t establish state exchanges — objected that, without the tax credits, they could have claimed exemption from the individual mandate penalty because they would be deemed unable to pay for the coverage. If the courts agree with them, the costs would go up in all 34 states that didn’t establish state exchanges, and the resulting exemptions could lead to a mass exodus from Obamacare.
The administration attempted to solve the problem by simply declaring that even residents of states without their own exchanges were eligible for subsidies, even though the law seemed to specifically say they were not. The administration argues that although the statute’s language does limit subsidies to residents of places with exchanges “established by the state,” that wording actually referred to any exchange, including those established by the federal government.
If the court rules against the Obama administration and the ruling stands, it would mean that individuals in states that defaulted to a federal exchange would no longer be eligible for subsidies. And in total, exchanges in 36 states were created at least in part through the federal government.
So, states opposed to Obamacare could simply refuse to set up a state exchange or to expand Medicaid. In those states, employers wouldn’t be penalized for failing to offer qualifying insurance (which is triggered by workers seeking federal subsidies), meaning that anti-Obamacare states could become more attractive to businesses trying to get around the employer mandate.
So, as zero hour approaches, some Republicans are scrambling to find an alternative. Bloomberg’s Al Hunt said this case could “boomerang” on Republicans. Has he forgotten that this was a Democratic law pushed through by Democrats via reconciliation? If anything, Democrats bear the burden of the blame for drafting an awful law.
Well, what does the polling say regarding Obamacare and health care subsidies after King?
According to a survey conducted by the Foundation for Government Accountability, more Americans believe the law has hurt, not helped the country. At the same time, as discovered in other polling data, the effects on families seems to have hit a ceiling; only 37 percent feels that Obamacare has detrimentally impacted their family, while 46 percent say there hasn’t been much of a difference, or they’re unsure. The FGA poll was conducted March 3-9 of 2015. It had a sample size of 1,564 adults who both voted in the 2014 midterm elections and live in one of the 34 states that have not established an Obamacare exchange.
Yet, if King tosses the subsidies, 46 percent blame Congress for botching the language of the law. Thirteen percent aren’t sure, and the IRS and the State virtually receive an equal share of the blame at 22 and 20 percent respectively. Overall, 63 percent of Americans want Congress to make changes to Obamacare; with 75 percent saying the changes should encompass everyone, not just the Americans impacted by the decision. For starters, 78 percent of voters, including 57 of Democrats support providing more choices into the health care market (i.e. being able to buy the types of plans that used to be sold pre-2014). Additionally, subsidies can only be allocated to government-approved health care plans on the Obamacare exchange. Sixty-eight percent of voters want those subsidies to follow all health care plans. Sixty-three percent of Democrats agreed. Lastly, the enrollment periods should be open-ended. Right now, the law only allows a brief three-month period for Americans to sign up on the exchanges. Again, there’s an enormous bipartisan consensus regarding allowing Americans to purchase insurance throughout the year, with 77 percent of voters agreeing with such a reform that includes 68 percent of Democratic voters.
So, regarding fixing the law, there’s enormous bipartisan support regarding more choices, subsidies that are tagged to all plans, and keeping enrollment periods open year-round.
By region–the Midwest, Northeast, South, and Western parts of the country–on average, 76 percent support the tweaks to enrollment, 78 percent support the re-introduction of more health care plans to boost choice, and 66 percent back extending the tax credit subsides to all plans.
So, both parties have a substantial base of support across the country to enact these reforms. The question is whether these politicians will be able to work together, or at all, given the media firestorm that will surely erupt if the Court sides with the plaintiffs in King.
Nevertheless, this won’t be a massive gutting of the bill, as some, including myself, might have thought in months prior. In fact, most of the law will remain intact (via NYT):
Unlike the case the court considered in 2012, which could have erased the Affordable Care Act entirely, this one concerns the application of only one provision of the law, and only to certain states. A ruling for the plaintiffs in the case, King v. Burwell, would carry huge consequences in many states, but 15 million of the people estimated to get insurance under the law would still get it, according to an Urban Institute estimate.
The list of policy changes that would be untouched by any legal ruling is very long. The law’s Medicaid expansion, now covering more than nine million poor Americans, will endure. Regulations on health insurance, limiting insurers’ ability to impose lifetime caps on coverage or exclude customers who have pre-existing illnesses, will remain. Young adults will still be able to stay on their parents’ insurance until they reach 26.
Major changes in the way Medicare pays doctors and hospitals, designed to make health care safer and more efficient, will continue. Workplaces will still need to provide places for lactating mothers to pump breast milk. Chain restaurants will still need to publish the calorie counts of their menu items. Drug companies will still need to report the money they pay to doctors.
Taxes on wages and health insurance and medical devices will remain in place.
There are some reports that premiums will skyrocket, but this can be avoided if the reforms the FGA highlighted are drafted into an actual bill. In that case, millions of Americans will have more choices and continued access to care, with Democratic and Republican support. Politically, for argument’s sake, Republicans can lay down a foundation to make Obamacare free market-oriented, while Democrats can have satisfaction that Obama’s signature health care law won’t be entirely disemboweled.
Some could argue that the window for gutting Obamacare in its entirely passed us by when we lost in 2012. After that, millions would be on those exchanges, and a sure-fire way to lose an election is to tell Americans you’re running on a platform that will take their health care away. Avik Roy of The Manhattan Institute–and editor at Forbes–released a white paper last summer on how other nations achieved more efficient health care coverage, and looked at a hybrid plan combining elements of how Switzerland and Singapore construct their respective systems. Both nations have some form of universal health care, but not through the messy, constitutionally questionable, and over-regulatory nature of the ACA. One thing that is highly appealing about Singapore’s plan is that health saving accounts is a mandatory provision, along with universal catastrophic care coverage. Every pay period a portion of everyone’s paycheck is rerouted to their HSA, out of the savings they can pay for the various means of maintaining their health. In the U.S., HSA’s allow Americans to buy high-deductible health insurance, expanding their ability to shop in the health care market, and they save some on taxes every pay period; they’re taxed at a lower rate since the money allocated to the account is pre-taxed (just make sure you spend it on medical-related incidents).
Additionally, the government plans in Singapore compete with a private health insurance market, which has kept prices low. Moreover, private health providers must list their prices in order to keep the market competitive, and people shopping for better plans. The Singaporean safety net is also means tested, which is a huge political hurdle over here.
As for Switzerland, it does have an individual mandate, but funding is solely focused on the destitute, according to Roy:
Switzerland offers its citizens premium support subsidies, on a sliding scale, for the purpose of buying private health insurance; there are no “public option” government insurers. Low-income individuals are fully subsidized; middle-income individuals are modestly subsidized; and upper-income individuals are unsubsidized. The sliding scale addresses a key challenge posed by welfare programs: mitigating the disincentive for welfare recipients to seek additional work, for fear of losing their benefits.
The Swiss system shares some of the unattractive features of the ACA, including the individual mandate. But because Switzerland focuses its public resources solely on lower-income individuals, the federation’s universal coverage system is far more efficient than America’s. In 2012, Switzerland public entities spent approximately $1,879 per capita on health care: 45 percent of U.S. public spending. Put another way, if U.S. government health spending was proportional to Switzerland’s, the U.S. would be able to eliminate its budget deficit.
What we do know from the FGA polling is that Americans do not want to pay more for setting up an Obamacare-based exchange in their state. Sixty percent are less likely to support such a measure, while only 30 percent of Democrats say the same. As for the business mandates with Obamacare, which affect 375,000 business and 86 million employees, 57 percent of Americans are less likely to support their state setting up an exchange if they knew enterprise would be subjected to these new regulations, but Democratic support dips to a dismal 23 percent.
As for the four regions of the country–Northeast, South, Midwest, and West–on average, 58 percent of voters are less likely to back their state legislature mulling setting up an Obamacare exchange, 54 percent would be less likely to back an exchange in their state if they knew the impact it will have on business.
The lack of Democratic support regarding setting up an exchange isn’t alien. Democrats like Obamacare, they want to see an expansion, albeit with the more choices, expansion of subsidies to all plans, and an open-ended enrollment period as discussed above. Overall, Republicans and Democrats want the law fixed. So, maybe there’s hope that legislators (and this is a big if) will see the benefits of these three reforms and not die on the hill concerning the business mandates in Obamacare.
Bonus: Daily Signal’s infographic on how the exchanges have fared.