Obamacare’s Survival Hangs on Four Words at High Court: Q&A

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Four Words That Could Gut Obamacare

The fate of Obamacare rests with U.S. Supreme Court. Again.

Three years after the court upheld the Affordable Care Act by a single vote, the justices are poised to consider a new challenge -- an appeal that has turned a routine question of how to interpret the statute into a threat to unravel the landmark 2010 law. The court hears arguments on March 4 and will rule by the end of June.

A decision against the Obama administration would wipe out the tax credits that make insurance affordable for millions of people under the law. It would also leave hospitals with billions of dollars in unpaid bills and potentially cause insurance markets to collapse.

“If the court rules for the challengers, there’s going to be chaos,” said Abbe Gluck, who teaches at Yale Law School and backs the administration in the case.

Below are answers to some pivotal questions about the case and its implications:

If the justices already upheld the statute, why are they considering it again?

The cases represent two different lines of attack. The 2012 challenge concerned whether Congress had the constitutional power to enact the law, focusing on its requirement that people either get insurance or pay a penalty.

The new case is narrower, centering on the statute’s language: At issue is whether Obamacare can provide subsidies nationwide to people who buy insurance, or only to those in the states that have set up their own online marketplaces, known as exchanges.

What’s the argument against the tax credits and who is making it?

The statute says people qualify for credits when they buy insurance on an exchange “established by the state.” Those four words matter because only about one-third of the states have set up exchanges, with the rest relying on the federal healthcare.gov system. The challengers contend that the people who buy on the federal exchange can’t claim the subsidies.

The group behind the suit, the Competitive Enterprise Institute, describes itself as an advocate for limited government and individual liberty. According to the Washington Post, the group’s financial supporters include companies tied to Charles and David Koch, the billionaire brothers who fund conservative causes.

The institute represents four Virginia residents who say they don’t want to buy the insurance required under Obamacare. Should the court block the subsidies, the four say they would fall within an exception to the insurance mandate for people who can’t afford coverage. One lurking issue that may arise during argument is whether any of the four has suffered the type of legal injury that entitles them to sue.

What is the administration’s argument?

The administration says the disputed phrase is a term of art that includes a federally facilitated exchange. U.S. Solicitor General Donald Verrilli urges the court to look beyond the “established by the state” wording to the rest of the act and its broad purpose of providing coverage to tens of millions of uninsured Americans.

Verrilli says Congress designed the law with the goal of offering tax credits nationwide and argues that no member of Congress suggested otherwise during the debate over the measure, which is President Barack Obama’s biggest legislative initiative.

What will happen if the court rules for the plaintiffs?

Prepare for falling dominoes. Within a matter of weeks, the healthcare.gov system would have to stop providing tax credits for an estimated 7.5 million Americans in the 34 states that never authorized their own exchanges. Many of those people would probably find premiums unaffordable without the subsidies and would drop their coverage, boosting the ranks of the uninsured.

Yet those who are sick and need insurance would probably try to hang onto their coverage, as healthy people dropped out. Insurers call this phenomenon “adverse selection,” and say it inevitably results in premiums spiraling upward. The Urban Institute estimates that premiums would increase by 35 percent, on average.

Doctors and hospitals, faced with more uninsured patients, would be forced to provide more uncompensated care. If they try to make up for the losses by charging commercial insurers higher prices, that would raise health-care costs for everyone.

Finally, the law’s requirement that employers provide insurance to their workers would be gutted in states where subsidies aren’t legal. Penalties on employers for not providing coverage are triggered when their workers receive a subsidy for an Obamacare plan; without subsidies, there’s no penalty.

How would the federal government and states respond?

It’s unclear. Representative Paul Ryan of Wisconsin, the Republican chairman of the powerful House Ways and Means Committee, has said his party will design a “bridge out of Obamacare” for people in states affected by the ruling. There’s no agreement among Republicans on how such a policy would work.

Three senior Republican senators said in a Washington Post op-ed article published Sunday that Congress would continue subsidies so people could stay on their Affordable Care Act plans during a “transitional period.” A Republican-designed health-care plan would replace Obamacare in states affected by the court ruling.

The senators -- Orrin Hatch of Utah, chairman of the Finance Committee; Lamar Alexander of Tennessee, chairman of the Health, Education, Labor and Pensions Committee, and John Barrasso of Wyoming, the fourth-ranking Republican in the Senate’s leadership structure -- didn’t say how long subsidies would continue or offer any details of their Affordable Care Act replacement.

States could respond by simply setting up their own exchanges. The Obama administration could make that easier, for example by letting them use healthcare.gov to sell insurance online.

However, the U.S. health secretary, Sylvia Mathews Burwell, said in a Feb. 24 letter to Congress that the administration couldn’t do much on its own.

“We know 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 an adverse decision,” she wrote.

What is corporate America’s take on the case?

The hospital and health-insurance industries are backing the administration. That includes HCA Holdings Inc., the hospital chain that is the nation’s largest private health-care provider. Trade groups for the hospital and health-insurance industries are also urging the court to back nationwide subsidies.

Who holds the pivotal vote?

The most likely candidate is Chief Justice John Roberts. He cast the decisive vote in 2012, joining the court’s four Democratic-appointed justices to uphold the core of the law. The other four Republican appointees voted to invalidate the entire measure, saying Congress exceeded its authority.

Opponents of Obamacare accused Roberts, normally the leader of the court’s conservative wing, of betrayal. Those criticisms escalated after CBS News reported that the chief justice first voted against the administration and then switched sides.

Which way is Roberts likely to go?

Both sides can find reasons for hope. Roberts is no stickler for statutory wording. He reads laws against the backdrop of institutional principles that Gluck says might cut in the administration’s favor, including deference to the views of administrative agencies.

In a 2009 case involving the Voting Rights Act, as well as the 2012 health-care decision, Roberts deviated from what he said was the most natural reading of a law to avoid declaring it unconstitutional.

“The chief is an institutionalist,” Gluck said. “He’s not a hyper-literalist.”

Jonathan Adler, a law professor who was one of the first to make the case against nationwide subsidies, says Roberts is more inclined to adhere to a statute’s wording in non-constitutional cases.

“The chief certainly is willing to bend a statute in order to avoid declaring a statute unconstitutional, but that’s not at issue here,” said Adler, who teaches at Case Western Reserve University in Cleveland.

One other factor: As chief justice, Roberts has always kept one eye on the court’s institutional integrity. One theory is that he was driven in 2012 by concern that a ruling striking down the law would be seen as a political decision.

If true, that thinking might suggest another Roberts vote in favor of the administration and another close call for Obamacare.

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