Supreme Court Justices Appear Split on ACA Subsidies Challenge

In oral arguments in the case King v. Burwell on Wednesday, the Supreme Court's justices appeared split on the issue of whether subsidies are permitted in the Affordable Care Act's federal exchange, the New York Times reports (Liptak, New York Times, 3/4).

Case Details

At issue in the case is that while the ACA says subsidies are available to help certain U.S. residents purchase coverage offered "through an exchange established by the State," a May 2012 IRS rule allows the subsidies to be used in an exchange administered either by a state or the federal government.

The plaintiffs argue that the IRS rule should be invalidated because it contradicts what Congress originally wrote in the ACA. Further, the plaintiffs argue that the ACA's subsidies harm them by making them subject to the law's individual mandate and that without the subsidies, they would receive an affordability exemption.

Meanwhile, the Department of Justice argues that Congress would not have set up such an intricate connection between the law's individual mandate and the subsidies if it intended for the subsidies to not be available in certain states.

The high court is expected to release a decision in the case by the end of June. If the court strikes down the federal exchange subsidies, the ruling would eliminate about $28.8 billion in subsidies to 9.3 million individuals in 34 states in 2016, according to an Urban Institute analysis (California Healthline, 3/4).

SCOTUS Justices Seem Split

The high court's four liberal justices seemed to express strong support for the subsidies. For example, Justices Stephen Breyer and Elena Kagan said that the law when read as a whole is clear that the subsidies should be available to individuals purchasing coverage through the federal exchange (New York Times, 3/4). Breyer said that even a "person from Mars" would realize that the law intended to allow federal exchange subsidies (Bravin/Kendall, Wall Street Journal, 3/4).

Further, Justice Sonia Sotomayor warned that a ruling striking down the subsidies could cause a "death spiral" in the individual market that the ACA "was enacted to avoid" (New York Times, 3/4).

Bader Ginsburg Brings Up Standing Issue

Justice Ruth Bader Ginsburg questioned whether all of the plaintiffs in the case have the standing to bring the subsidies challenge (Bravin/Kendall, Wall Street Journal, 3/4). She noted that the court should know whether any of the plaintiffs have a "concrete stake" in the case's outcome.

However, lawyers for the plaintiffs argued that only one of the plaintiffs needs to have standing to bring the challenge. Further, Justice Samuel Alito and Chief Justice John Roberts seemed skeptical that the standing issue was important (Radnofsky, Wall Street Journal, 3/4).

Kennedy Could Be Swing Vote

Meanwhile, Justice Anthony Kennedy, a conservative member of the court, made statements indicating he could be swayed to both sides of the case. For example, Kennedy said that the plaintiffs could "prevail" based on "the plain words of the statute," but he also said there would be "a serious constitutional problem" if the justices "adopt [the plaintiffs'] argument." Specifically, Kennedy repeatedly questioned whether Congress holds the constitutional power to force states to choose between creating their own exchanges or allowing their residents to lose out on the subsidies (New York Times, 3/4).

However, Kennedy also noted that it would be a "drastic step" for the court to rule that the IRS "and its director can make this call one way or the other when there are ... billions of dollars of subsidies involved" (Howell, Washington Times, 3/4). Roberts noted that in such an instance, "a subsequent administration could change that interpretation" of the law to no longer allow the subsidies for coverage sold through the federal exchange (Haberkorn, Politico, 3/4).

Overall, Kennedy did not seem to commit to either side of the case, according to Reuters (Hurley, Reuters, 3/4).

Conservative Justices Focus on the Text

Alito and Justice Antonin Scalia focused mostly on the ACA's text and seemed critical of the Obama administration's position. Scalia noted that the ACA "means what it says," even if that means "disastrous consequences" (New York Times, 3/4). He continued, "I mean, it may not be the statute [Congress] intended," but "[t]he question is whether it's the statute that they wrote" (Washington Times, 3/4).

Alito and Scalia added that Congress or the affected states could act to remedy the issue if the subsidies are ruled illegal (New York Times, 3/4). Further, Alito said the court could delay its ruling's effective date to the end of the tax year if the subsidies are struck down to allow states to create their own exchanges so that "[g]oing forward, there would be no harm" (Reuters, 3/4).

Roberts Mostly Quiet, Thomas Silent

Roberts stayed mostly quiet during the arguments and did not indicate his opinion. Roberts was the vote that upheld the ACA the first time it faced a major challenge in 2012 (New York Times, 3/4). According to Reuters, Justice Clarence Thomas did not ask any questions during the arguments, which is usual for him (Reuters, 3/4). Thomas dissented to the high court's opinion in the 2012 case.

Reaction

White House press secretary Josh Earnest warned that it is "unwise" to make assumptions on the case's fate based on the justices' questions, which could produce "some erroneous predictions about the likely outcome" (New York Times, 3/4). Still, he reiterated that the administration believes there are "no contingency plans that could be implemented that would prevent the catastrophic damage" that would come from a ruling invalidating the subsidies. Further, Earnest said he doubted that Congress would act to remedy the issue if the subsidies are struck down because Republicans have fought "tooth and nail" to dismantle the ACA (Reuters, 3/4).

Ron Pollack, Families USA's executive director, said that overall the justices seemed supportive of the administration's arguments, adding, "There was a true understanding by all the justices that if they were to rule in favor of the plaintiffs, there would be a disastrous outcome" (Bravin/Kendall, Wall Street Journal, 3/4).

Jonathan Adler, a Case Western Reserve University law professor who helped to mount the challenge, said that it seems as if the justices would not leave the subsidies language up to the administration's interpretation. Specifically, Adler noted that Kennedy and Roberts "showed keen skepticism to the idea that something of this magnitude would be left to the IRS rather than the statutory text" (Washington Times, 3/4).

ACA Would Remain Even if Subsidies Are Struck Down

Even if the justices rule to strike down the subsidies, the ACA would still continue as law, the New York Times' "The Upshot" reports.

While such a ruling would have drastic consequences in states that did not create their own exchanges, the majority of the law would remain intact, including its:

• Limits on health insurers to impose lifetime caps on benefits or exclude individuals with pre-existing medical conditions;
• Medicaid expansion;
• Medicare reimbursement changes;
• Provision allowing individuals to remain on their parents' coverage until age 26;
• Requirements that drug companies report the amounts of money they give to providers;
• Requirements that some restaurants provide calorie counts on their menus;
• Requirements that workplaces provide areas for lactating women to pump breast milk; and
• Taxes on health coverage, wages and medical devices.

In addition, subsidies still would be available in states that created their own exchanges (Sanger-Katz, "The Upshot," New York Times, 3/4).

SCOTUS' Decision Unlikely To Change Public Views on ACA

Further, a Supreme Court ruling that the subsidies are illegal would be unlikely to change the public's overall views on the law, the Washington Post's "The Fix" reports.

According to "The Fix," U.S. residents' perceptions of the ACA have remained mostly stagnant since the law was enacted in 2010. Despite repeated legal challenges to the law and a tumultuous launch of HealthCare.gov, analyses of public opinion of the law have remained steadfast.

One reason public opinion could be so unwavering on the ACA is because since debate on the law has occurred various times, most people paying attention to the policy and politics surrounding the ACA already have formed strong opinions on the issue. In addition, individuals in some cases have linked the ACA with President Obama, meaning that those who favor the president likely also favor the ACA and vice versa (Cillizza, "The Fix," Washington Post, 3/4).

Insurers Hope for Subsidies Fix if SCOTUS Rules Them Illegal

In related news, health insurers are hoping that lawmakers would implement a workaround to continue the subsidies if the high court rules they are illegal for individuals purchasing coverage through the federal exchange, Modern Healthcare reports.

While some insurers have said they would consider their own backup plans if the subsidies are struck down, others have emphasized the need for action from the federal government. For example, actuaries have said the federal government should allow insurers flexibility in setting 2016 premium rates, which are due ahead of the expected June ruling. The American Academy of Actuaries suggested that insurers could submit two different rate sets or make changes to the rate filings after the ruling is issued.

Meanwhile, Mark Rust -- a partner at Barnes & Thornburg who advises Land of Lincoln Health, a co-op insurer in Illinois -- said he hopes that either:

• Congress implements a transition period for individuals who would lose the subsidies under a ruling striking them down; or
• That states currently using the federal exchange create their own exchanges (Herman, Modern Healthcare, 3/4).

In a letter to Congress last month, HHS Secretary Sylvia Mathews Burwell said the Obama administration has no contingency plan if the high court strikes down the subsidies. She wrote that the administration "know[s] of no administrative actions that could, and therefore we have no plans that would, undo the massive damage to our health care system that would be caused by" a ruling invalidating the subsidies.

Republican leaders in Congress have unveiled potential backup plans in case the subsidies are ruled illegal (California Healthline, 2/27).