The Supreme Court Could Gut the Affordable Care Act in 34 States

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The Supreme Court Could Gut the Affordable Care Act in 34 States

Jessica Mason Pieklo

The Affordable Care Act will be gutted by the summer if challengers get their way before the Roberts Court.

The U.S. Supreme Court announced Friday it would take up the issue of whether the federal government can offer subsidies to offset health insurance costs to people in the 34 states that refused to set up their own health insurance exchanges.

At issue is one of the cornerstones of the Affordable Care Act: premium tax credits, otherwise known as subsidies, available to some to help offset the cost of their health insurance premium. So far, 14 states have established their own health insurance exchanges, while those 34 states run by conservatives ideologically opposed to the health-care law have refused.

The Obama administration, as authorized by the ACA, stepped in when Republicans refused to set up a state exchange and set up its own federally run health insurance exchange.

Conservative opponents to the Affordable Care Act argue the language of the ACA allows only the states, and not the federal government, to offer subsidies for health insurance purchases.

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They claim that in establishing the subsidy structure, Congress dictated it would apply only to exchanges “established by the state” and argue those four words limit the availability of those tax benefits solely to state-run exchanges.

In other words, according to ACA opponents, Congress never intended for consumers in states run by conservative opponents to health-care reform to receive the tax benefit.

The Obama administration disagrees and says that an entire reading of the health-care reform statue and its legislative history make it clear that Congress had no intention of ever limiting tax credits to only those living in states that set up their own health insurance exchanges. The administration argues that the entire point of the ACA is to expand coverage to as many people as possible and that if those premium tax credits were not available everywhere, key policy goals would be impossible to attain because insurance would remain unaffordable for millions of Americans.

Conservative legal scholars launched a series of lawsuits challenging the federal government’s ability to offer subsidies in its exchanges, including King v. Burwell, the case the Roberts Court agreed to hear Friday.

A unanimous panel of judges on the Fourth Circuit Court of Appeals in King ruled in favor of the administration, while a divided panel of judges from the D.C. Circuit Court of Appeals ruled the subsidies were invalid.

Meanwhile, the entire panel of judges of the D.C. Circuit Court of Appeals will hear an identical challenge in December in Halbig v. Burwell. A federal district judge in Oklahoma ruled in late September against the administration in yet another challenge to the subsidies. That ruling is stayed pending an expected appeal by the Obama administration to the Tenth Circuit Court of Appeals.

The Supreme Court normally releases its list of cases it will hear on Mondays, so Friday’s order caught some legal scholars by surprise.

As of now, there is no disagreement among the federal appeals courts as to whether or not the Obama administration can offer the subsidies. A panel of judges for the D.C. Circuit Court of Appeals ruled against the administration, but that decision was vacated after the entire panel of judges agreed to hear the case. That means there is no current split among the federal courts of appeals, which is normally when the Supreme Court intervenes in a dispute.

Nearly five million people have received federal subsidies to help them afford health insurance on an exchange run by the federal government, with the average subsidy about $4,700 per person, according to SCOTUSblog.

Should the challengers succeed in their claims before the Roberts Court, the effects would be far-reaching. Not only would those nearly five million people lose health-care subsidies; the ripple effects in the insurance market could be devastating.

Many people who receive the subsidies now would find insurance so expensive that they would qualify for the law’s hardship exemption and no longer have to obtain a policy, leaving a fresh crop of newly uninsured people and shifting, again, the financial burden onto hospitals to carry the costs of treating more uninsured patients.

For some with chronic illnesses, where insurance coverage is absolutely necessary, it could leave them to purchase insurance only through through the individual market, raising the rates there as well.

The Roberts Court has not scheduled a date yet for oral arguments in the case, but Friday’s order means a decision will happen by the end of the Court’s term, in June 2015.