March 9, 2015

What If the Affordable Care Act Loses?

Robert Graboyes

Senior Research Fellow
Summary

On March 4, the U.S. Supreme Court heard oral arguments in the case of King v. Burwell, and a ruling should come around June. Ironically a ruling for King would largely demolish the Affordable Care Act by reinforcing the letter of the law itself and by triggering death spirals.

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On March 4, the U.S. Supreme Court heard oral arguments in the case of King v. Burwell, and a ruling should come around June. Ironically a ruling for King would largely demolish the Affordable Care Act by reinforcing the letter of the law itself. Here’s the gist of the case:

The health care law's individual mandate requires almost everyone to have health insurance or else pay a tax. If the law deems health insurance unaffordable for an individual, he may seek premium subsidies, but only on policies purchased through a health insurance exchange “established by the state under [Section] 1311.” If a large employer has any subsidized employees, it must pay an employer mandate penalty. No subsidized employees means no penalty. Section 1311 of the law sets rules for establishing state exchanges. If a state doesn’t meet the guidelines, the federal government follows Section 1321’s rules to establish a federal exchange (aka., healthcare.gov).

The federal government (Burwell) contends that Congress wanted subsidies available in both Section 1311 and Section 1321 exchanges, and some supporters say the case arises from a “drafting error.” Thirty-six states declined to establish Section 1311 exchanges, so the federal government established Section 1321 exchanges in those states. The law states that subsidies are available in Section 1311 exchanges but never says so with respect to Section 1321 exchanges. The plaintiffs (King) ask the Obama administration to follow the letter of the law.

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