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December 04, 2014 at 08:16 AM
While much of the Sunday morning talk show fodder has been focused on how a Republican-controlled Senate could change the Patient Protection and Affordable Care Act — which I prefer to call the ACA — the most pressing danger to the future of the legislation lies with the Supreme Court’s decision to hear the King vs. Burwell appeal. Depending on the court’s ruling, we could see a substantial reduction in enrollment through certain public exchanges and a weakening of the employer mandate.
At its core, the King vs. Burwell lawsuit challenges the Internal Revenue Service interpretation of the phrase “through an exchange established by the state under Section 1311.” These words have become so important because, of the 51 exchanges that are currently operating (all states and the District of Columbia), only 17 of them were “established by the state.” The remaining 34 exchanges are operating with various levels of federal assistance to create an enrollment platform.
The court’s decision will have broad ramifications on the ACA. Let’s look at a few different scenarios that could play out.
1. The Supreme Court determines that subsidies are allowed on both state-run and federally-run exchanges.
The Court could determine that the IRS’ decision to allow subsidies on both federally-run and state-run exchanges is within the meaning of the legislation. This would maintain the status quo, and would not affect individuals currently receiving subsidies, nor would it affect the applicability of the employer mandate.
2. The Supreme Court determines that subsidies are available only on state-run exchanges.
The court could decide that the language written in the law does not allow the IRS to use a broad interpretation. Therefore, if only states with state-run exchanges are eligible to provide subsidies, over four million Americans currently receiving subsidies on federally run exchanges could see those disappear.
It seems unlikely that many of these Americans would be able to continue to afford to purchase health insurance. This would create challenges for the federally run exchanges, which would most likely see a drop in enrollment, and would make enforcement of the employer mandate difficult. Since an employer can trigger the mandate’s penalties only when an employee purchases coverage on an exchange and receives a subsidy, fewer employers would be subject to these penalties.
See also: How states can save PPACA without waiting for courts
If we’re faced with the second scenario, there are some potential actions that could take place, but all would face political headwinds.
