(Bloomberg) — Millions of Americans could lose their insurance if the U.S. Supreme Court rules against the Obama administration’s interpretation of a key provision in the Patient Protection and Affordable Care Act of 2010 (PPACA). And with the decision due in the next two weeks, the government has no known backup plan.
The court will say whether tax subsidies under PPACA that make insurance more affordable for 6.4 million people in 34 states are legal. If it decides they aren’t, that would trigger a high-stakes debate between the administration and Congress over how to respond. Most of the states appear to have no answer, either.
A ruling against the subsidies in the health care law — President Obama’s biggest domestic achievement — could triple or quadruple the amount many enrollees pay each month for insurance premiums, forcing those enrollees to drop out and sending costs soaring for the remaining enrollees.
“Chaos would ensue quite quickly,” said Larry Levitt, a senior vice president at the Kaiser Family Foundation, a nonprofit group that studies health care policy issues.
There are steps the government could take: States affected by the ruling could set up their own health-insurance marketplaces, called exchanges. The federal government could make it easier for them by sharing the technology behind its HealthCare.gov system.
The distinction between state and federal marketplaces matters because the case hinges on the meaning of four words in the law that appear to reserve tax subsidies to people buying insurance on exchanges “established by a state.”
Opponents of the law sued, arguing that the subsidies shouldn’t be available in the three-dozen states that haven’t established their own exchanges and use the healthcare.gov system instead. Democrats who wrote PPACA say that was never their intent.
Many states say that setting up their own exchanges would be too expensive, or their governments are run by Republicans who refuse to do that. The Republican-controlled U.S. Congress is more interested in repealing the health care law than in revising it.
“There’s a significant constituency within the Republican Party which is ‘repeal or nothing,’” said Margaret Foster Riley, a law professor at the University of Virginia in Charlottesville. “The concern is we’re going to play chicken right up to the brink.”
The first unknown is exactly when that brink would come. It’s possible that a ruling against the administration would end subsidies within a month. But Justice Samuel Alito suggested during oral arguments in March that the high court could stay its decision “until the end of this tax year” to allow Congress time to address the “very disruptive consequences.”
“Most of the court would be reluctant to come down with a decision that would immediately end insurance subsidies for millions of Americans, so I think there will be pressure in the court to find a decision that won’t do that,” said Hank Greely, director of the Stanford University Center for Law and the Biosciences.
Yet a court-ordered delay would be highly unusual. The Supreme Court hasn’t done that since it stayed a 1982 decision that otherwise would have shut down the nation’s bankruptcy courts.
U.S. Solicitor General Donald Verrilli, the Obama administration’s lawyer, said during oral arguments that even a stay until the end of the tax year wouldn’t provide enough time for states to set up their own exchanges. That means attention would rapidly shift to Capitol Hill, where Republican congressional leaders say they’d have leverage to force significant revisions to the health care law.
Republican lawmakers are meeting Wednesday afternoon to discuss progress on legislation intended to respond to a ruling against the government, Brendan Buck, a spokesman for Rep. Paul Ryan, said in an e-mail. Republican leaders aren’t ready to release a final plan, he said. Ryan, a Wisconsin Republican who chairs the House Ways and Means Committee, has previously floated a proposal to let states ditch PPACA and elect an unspecified alternative health insurance system.
Sen. Ron Johnson, another Wisconsin Republican, has proposed extending premium subsidies until August 2017, giving time for a new president and Congress to then deal with the issue. One condition of S. 1016: stripping out the law’s requirement that Americans carry insurance — the so-called individual mandate that barely survived a Supreme Court challenge in 2012.
A group of almost two-dozen House Republicans, led by Georgia’s Tom Price, take a harder line in H.R. 2650: They want to end the mandate, shut down HealthCare.gov, allow insurers to once again charge higher prices to sick people or refuse them coverage, and repeal a requirement that young adults be allowed to stay on their parents’ plans.
The White House says any of those proposals would undermine the law, increase insurance costs, and leave millions without coverage. If Obama loses at the court, he’d probably pressure Republicans to quickly adopt a simple fix by highlighting the harm facing average Americans.
“The president’s going to trot out people on dialysis, people getting cancer treatment, he’s going to pull out the full-court press on this,” Josh Blackman, an assistant professor at the South Texas College of Law who filed a brief with the Supreme Court supporting plaintiffs in the case, said in a phone interview.
If congressional Republicans and the White House can’t reach a deal, states will have to decide how to proceed. Should they build their own exchanges, they could rely on technology already developed by the federal government or private companies that have offered low-cost solutions.
Nevada and Hawaii, which initially launched their own exchanges, have shuttered those sites and will rely on HealthCare.gov going forward. Sylvia Mathews Burwell, secretary of the U.S. Department of Health and Human Services (HHS), told the House Ways and Means Committee that if the court decides for the plaintiffs, the government would “do everything we can” to help states rapidly set up their own exchanges.
But “the critical decisions will sit with the Congress and states and governors to determine if those subsidies are available,” Burwell said in her June 10 testimony.
See also: The PPACA Florida puzzle
Florida, with the most residents enrolled in PPACA plans, and Texas, with the nation’s highest proportion of uninsured people, have the most to lose from a court decision ending subsidies.
New Jersey Governor Chris Christie says it’s up to the federal government to resolve any problems.
“The Congress and the president created this statute — they should fix it,” Christie told reporters on June 6 in Concord, N.H.
Other states might pass legislation or sign executive orders establishing an exchange, while continuing to send their citizens to HealthCare.gov. Or they could open their own full-fledged marketplaces, as in California and New York.
That presents a political challenge, especially in the majority of states where Republicans control the legislature or governor’s mansion. In addition, extensive technical failures and cost overruns in some states that built their own exchanges have left legislators elsewhere skeptical.
One last possibility: The Obama administration can use its regulatory power to try to forge a solution. For example, the government could declare states that still regulate their own insurance plans to have state-run exchanges. That’s considered legally questionable.
“If there was a better way of doing this,” Blackman said, Obama “would have done it four years ago.”
—With assistance from Greg Stohr in Washington, Margaret Newkirk in Atlanta, Lauren Etter in Austin and Elise Young in Trenton.