The wait is over. The Supreme Court has finally ruled (6-3) in King v. Burwell that the tax credits under the Affordable Care Act (ACA) are available to purchase insurance on the federal health care exchanges being used in 36 states as well as on the exchanges set up by the remaining states. The ACA has survived a second, and likely last, near-death experience.
At issue was an ACA section (26 U.S.C. §36B) providing subsidies/tax credits to individuals who enroll in “an Exchange established by the State under [ACA §1311].” ACA §1311 instructs states to form exchanges. ACA §1321 provides that if a state refuses to form an exchange the federal government (HHS) “shall…establish and operate such Exchange within the State.” The plaintiffs argued that the plain language of the statute limited credits to state established exchanges.
The majority opinion by Chief Justice Roberts acknowledged that “Petitioners’ arguments about the plain meaning of Section 36B are strong” but found that when the phrase “Exchange established by the State” is interpreted in the context of the statute, it is ambiguous – it could refer to just state exchanges or to all exchanges, both state and federal. Hence, the phrase must be interpreted with reference to the statutory scheme and purposes of the statute.
The opinion focused on Congress’ intent. It outlined the “long history of failed health insurance reform” that led to the enactment of the ACA. States in the 1990s adopted guaranteed issue and community rating that barred insurers from considering a person’s health when deciding whether to sell insurance or how much to charge. This purportedly led to a “death spiral” as healthy people waited until they got sick to buy insurance and only the sick enrolled leading to a sicker insurance pool, higher premiums and a cycle of additional healthy people leaving the market, higher premiums and insurers exiting the market. Congress was determined to avoid death spirals so it adopted three interlocking reforms: 1) guaranteed issue and community rating; 2) the individual mandate so that the healthy would stay in the market; and 3) tax credits to make insurance affordable.
The Court found that,
Here, the statutory scheme compels us to reject petitioners’ interpretation because it would destabilize the individual insurance market in any State with a Federal Exchange and likely create the very ‘death spirals’ that Congress designed the Act to avoid.
The petitioners’ interpretation would knock out two of the three reforms — tax credits would not apply in federal exchange states and the individual mandate would not apply in a meaningful way because 87% of federal exchange enrollees are receiving credits and without the credits their insurance payments would exceed 8% of their income and they would be exempt from the coverage requirement. The Court reasoned,
The combination of no tax credits and an ineffective coverage requirement could well push a State’s individual insurance market into a death spiral. …It is implausible that Congress meant the Act to operate in this manner.
The Court concluded, “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them.”
Interestingly, the Court did not mention two arguments advanced by liberal law professors. The first was the Federalism argument that a statute cannot be read to impose a drastic condition or consequence (loss of subsidies) on states unless the statute is crystal clear at the time of enactment. The second was that a plaintiffs’ victory and loss of subsidies would be unconstitutionally coercive for states in the same way that the ACA’s Medicaid expansion was found to be in 2012, leaving states with no choice but to form an exchange. The Court seemed less concerned that a loss of subsidies and death spirals would burden or coerce states and more concerned they would thwart Congress’ intent in enacting the ACA.
I, and others, have argued that the historical evidence of death spirals cited by the Court is suspect and that projections of future death spirals if subsidies are disallowed are even less believable. Nevertheless, the Court seemed inclined to uncritically credit them. Perhaps, as Justice Scalia’s scathing dissent (joined by Justices Thomas and Alito) argued, that is a manifestation of “the overriding principle of the present Court: The Affordable Care Act must be saved.”
After this decision there is little left to distinguish the state and federal exchanges. More and more states may come to the conclusion that there is no reason to continue with the expense and administrative burden of maintaining a state exchange, eventually leading to a federally run exchange for the entire country.
from AEI » Latest Content http://ift.tt/1BRUmq4
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