It is D-Day once again for Obamacare, the President’s hard-won health law, which stands again before the Supreme Court.
Opponents are asking the Supreme Court to determine a critical question: does the text of the law authorize tax subsidies for 6.4 million Americans who have already received help to afford health coverage?
As the justices work toward a self-imposed June deadline, they will seek to answer that question, knowing that if they side with the challengers the ruling could severely destabilize the structure of the entire law. Here are five questions to understand what is going on:
1. What are healthcare exchanges?
A foundation of the law is the establishment of “exchanges” - marketplaces set up by the government but through which individuals can purchase competitively priced private health insurance. It also authorizes federal tax credits to low and middle-income Americans to help offset the cost of the private insurance policies.
Sixteen states plus the District of Columbia have set up their own exchanges; the remaining 34 rely on marketplaces run all or in part by the federal government.
The President and his supporters say the aim of the law was to provide the subsidies for all eligible individuals nationwide.
“This is now a part of the fabric of how we care for one another”, the President said in a speech touting the law at Georgetown last week. “This is health care in America.”
2. Why are the four words “established by the state” so important?
Challengers say those four words – “established by the State” – in a section of the law make clear that subsidies are only available to those living in the 16 states that set up their own exchanges.
Michael Carvin, the lead lawyer representing the Virginia plaintiffs, argued in Court that the IRS—an agency charged with implementing the ACA—was wrong to interpret it as offering subsidies to more than 5 million people living in states that have federally run exchanges. He said that Congress limited the subsidies in order to encourage the states to set up their own exchanges, but when only a few states acted the IRS tried to “fix” the law.
“If the rule of law means anything,” Carvin argued in court papers, “it is that text is not infinitely malleable, and that agencies must follow the law as written—not revise it to ‘better achieve’ what they assume to have been Congress’s purposes.”
A ruling against the government wouldn’t nullify the law, but absent a fix by Congress or the States, it would destabilize it. If millions of American were to lose the tax subsidies and as a result not buy insurance, it would cause premiums to skyrocket in the individual market because there would be less healthy people in the pool.
Solicitor General Donald B. Verrilli told the justices in March that it was “abundantly clear’ that some states would not establish their own exchanges and that if the challengers win, those living in states with federally facilitated exchanges would “face the very death spirals the Act was structured to avoid.”
3. What does the decision mean for consumers?
Some 6.4 million enrollees in the affected states could lose their subsidies as soon as Aug. 1, depending on how the court rules. The subsidies are what make Obamacare plans affordable for most enrollees. Some 87% of those participating receive this government assistance, which comes to an average of $272 a month. Cindy and Joe Connelly would likely be uninsured if they didn’t receive subsidies. They used to have coverage through Joe’s job as a machine repairman, but lost it after he was laid off.
The couple, who live in the Cincinnati suburb of Amelia, Ohio, signed up for Obamacare as soon as it became available. This year, they pay only $233 a month for a policy that would otherwise cost them more than $1,000.
Earlier this year, Joe, 64, developed cardiac problems during a routine stress test. He was rushed to the hospital, where his overnight stay exceeded $35,000.
Having affordable health insurance takes one worry off the couple’s plate.
“If something happens, we’re not going to lose our home and everything we worked for,” said Cindy, who is 63.
4. What does the decision mean for Obamacare?
A ruling against the Obama administration could send Obamacare into a death spiral.
It’s likely that millions of enrollees would discontinue coverage after losing their assistance, experts said. But the sicker customers would likely stay because they need the insurance no matter what the cost, said Mike Kreidler, vice chair of the National
Association of Insurance Commissioners’ health committee.
“Insurers would have to raise rates considerably because they’ll wind up with sicker people,” said Kreidler, who is also insurance commissioner for the state of Washington, which would not be affected by the ruling.
Soaring rates might prompt some remaining customers to leave the market next year.
Several members of Congress have proposed alternatives, but many want to eliminate the so-called individual mandate, which requires that nearly all Americans obtain coverage. This is a key provision because it brings younger, healthier people into the exchanges, who help lower premiums because they don’t need as much care.
5. What could states do if the Supreme Court rules against the law?
States could try to set up their own exchanges to meet the new standard. Pennsylvania and Delaware have already received conditional federal approval to set up their own exchanges for 2016.
Creating an exchange is not such an easy task, however. One of the biggest hurdles is political will. Many of the states with federal marketplaces are run by Republican governors and have Republican-dominated legislatures who have said that they want nothing to do with Obamacare.
And then there are financial and technical complications. The feds are no longer giving states seed money to develop exchanges, and exchanges have to be self-supporting by next year. Also, one only needs to look at the early days of healthcare.gov to know how technically complicated and time consuming it is to create a health insurance exchange.
The other option is for Congress and the White House to work together and fix those four words - “established by the state.” But the White House, which has been fiercely protective of the Affordable Care Act, has suggested it would not accept further changes to the law and Republicans, who now control both houses of Congress, have suggested they would try to use the opportunity of fixing the four words to seek other changes.
Health and Human Services Secretary Sylvia Burwell has said that invalidating the subsidies would cause “massive damage” to the health care system. If this were to happen, it would be up to states and Congress to figure out a way to help those who could no longer afford coverage, she said in mid-June.