As States Await ACA Ruling, Accounts Emerge of Congress' Intent and Looming Fallout

It’s been nearly 3 months since the Supreme Court of the United States heard oral arguments in King v. Burwell, the case that will decide whether a central feature of the Affordable Care Act (ACA) survives. As June approaches and a ruling looms, the story behind the “drafting error” that created the case is emerging, along with grim assessments of what’s ahead if the plaintiffs succeed.

King v. Burwell boils down to whether a majority of the justices choose to interpret 4 words—“established by the state”—so literally that they would agree with the plaintiffs, who argue that consumers living in states that did not set up their own exchanges should be barred from receiving premium subsidies available under the law. These subsidies have made health insurance affordable for 8 million low- and middle-income Americans in the affected states, who stand to lose subsidies and potentially their coverage.

Conservatives on the court, led by Justice Antonin Scalia, said during March 4, 2015, oral arguments that the law as written is what matters, while the liberal justices asserted that Congress clearly did not mean to bar consumers from receiving subsidies; Justice Elena Kagan pointed out that no one even noticed the provision for more than 2 years.

Now, more details are emerging of just how at odds the plaintiffs’ arguments are with the recollection of those who drafted the ACA in 2010—both Democrats and Republicans. An account in The New York Times quotes former Republican Senator Olympia J. Snowe of Maine saying that no distinction was ever made between federal and state exchanges in terms of subsidies, and former Senator Jeff Bingaman, a New Mexico Democrat, who was on both committees that developed the bill, said he was surprised the case reached the court, because it was clear the dispute was over a “drafting error.”

The Times account goes on to quote lawyers on the committees, both Democrats and Republicans, who say such distinctions were “never discussed,” and were “contrary to the intent” of those who wrote the legislation. This account gets closest to finding the source of the problem—an apparent failure to cross reference the matter of the subsidies in the portion of the bill on the tax code that allowed federal government to create an exchange for states who failed to do so on their own.

Of course, what matters now is what the justices do. If they rule in favor of the plaintiffs, experts predict the fallout will fall hardest on Republicans, since most states without exchange are controlled by the GOP. Notably, 22 of the 24 US Senate seats up in 2016 are in states that could be adversely affected by King v. Burwell. Many are in the South, where, ironically, a larger than normal share of consumers have benefited from subsidies despite political resistance to the law, including a refusal to expand Medicaid.

Stripping away subsidies would set off what insurance professionals call a “death spiral” in the affected markets. The ACA works because while insurers can no longer turn away consumers for pre-existing conditions, this risk is offset by the individual mandate that requires everyone to buy coverage. Premium assistance ensures that consumers who might otherwise not be able to afford coverage can obtain it. Take away subsidies, and those without chronic health issues might seek hardships due to their inability to pay. In fact, these hardships have been common among those in the “coverage gap” where Medicaid has not expanded.

When only those with high utilization needs buy insurance, it forces up prices and quickly makes coverage unaffordable. Justice Anthony Roberts discussed this potential in his comments during oral arguments, and the disruption it would cause in those states. The potential for chaos was not lost on Justice Samuel Alito, who alluded to the possibility of delaying an effective date for the ruling until the expiration of the current enrollment year, to give the markets time to adjust.

US Senator Ron Johnson, a Wisconsin Republican, has introduced a bill that would keep subsidies intact for current policyholders through 2017, which would give states time to act and leave the broader problem for the next president to fix. But Johnson’s bill also repeals the individual mandate and requirements for large employers, so President Obama’s signature is highly unlikely.