King v. Burwell: A Potential Blow to the ACA
March 31, 2015
The Health, Education, and Welfare branch of Wonk Tank has explored the newest Supreme Court case regarding the Affordable Care Act, King v. Burwell. This case has the potential to undermine the foundation of the act and impact the lives of many Americans seeking health insurance.
In early March the Supreme Court heard oral arguments in King v. Burwell, the most recent challenge to the Affordable Care Act (ACA). The case is a debate over a particular provision of the Act which authorized federal tax subsidies for low-income individuals, but only if they purchase health insurance through an “Exchange established by the State.” King argues that Congress intentionally restricted payment of subsidies to state exchanges to induce states into setting up exchanges so their citizens could receive subsidies. Burwell, however, finds that the law intended for federal exchanges to be treated identically to state exchanges and therefore entitling individuals to subsidies whether or not their state has set up an exchange.
The case is essentially a result of rather imperfect legislative writing of the ACA into law. The problem was that the law passed due to a skipped “conference committee,” where the House and the Senate would meet and edit the bill to streamline their disagreements. It is important here to realize that each hoped to pass a different version of the law. However, under the protection of the filibuster, the law passed. This led to messier legislative language, which is evidenced by this case. There is other evidence that suggests Congress was not careful in differentiating between state and federally-based exchanges. Despite the clear confusion in the wording of the law’s clause, neither side of the case is asserting that the wording of the clause was a mistake, partially because both are aware of the significant impacts the ruling can bring. 
The lawsuit, if successful, would eliminate subsidies from the 36 states that use the federal exchange because they did not create their own state exchanges. This would effectively destroy much of the ACA in those states. The vast majority of the people using these exchanges – 87 percent – are receiving tax subsidies from the federal government to help purchase their insurance plans. These are people who earn between 100 and 400 percent of the federal poverty line ($11,770 to $47,080 for an individual; $24,250 to $97,000 for a family of four). Furthermore, if the plaintiffs succeed, any of two outcomes could affect this population: if health insurance would cost more than 8% of their income, rendering it unaffordable by federal standards, they could simply forgo health insurance without penalty; if insurance costs less than 8% of their income, then they can either buy insurance (without subsidies) or they can pay the penalty. Another side effect that could be rendered affects large employers. Employers with 50 or more employees are required to provide health insurance for the employees, or else pay a penalty. This penalty is also contingent on employees having the right to receive subsidies on the exchange. If no subsidies are available, employers’ penalty also does not follow.
No one really knows whether the law can be fixed if the Supreme Court rules against it. However, the Obama administration has proposed two possible remedies: Congress could pass new legislation to fix the law, or states could establish their own exchanges. Regardless of these remedies, the executive branch believes it would have to stop distributing these subsidies, which would affect a significant portion of the population receiving health insurance. Thus, not only will this decision have a potentially profound impact on health care, but it also brings us back to the everlasting argument regarding our judicial system and how the Constitution and laws should be interpreted. Should laws be applied exactly as they are written regardless of meaning or should the intentions of law be honored? Both theories of practice have their merits. But either way, this current debate in the Supreme Court over semantics is sure to have repercussions.
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