The Two Questions that Could Make or Break the Case Against Obamacare

A month before the Supreme Court hears the King v. Burwell case, outlets are digging into the argument against the tax credits. Here’s what they’ve found.

Photographer: Mladen Antonov/AFP via Getty Images

The conservative lawsuit against Obamacare’s premium subsidies is important, but also wonky, not the sort of thing that does well on cable news. And yet for a few weeks last fall, the biggest story on Fox News was the unearthing of videos depicting Jonathan Gruber, Obamacare architect, demonstrating the argument conservative legal scholars have been making: Federal exchange states should not have access to health-care tax credits.

The Gruber videos were big not just because they showed someone vaguely within President Barack Obama’s orbit talking about misleading voters, but because they gave a vivid example of what Congress meant by an exchange “established by the State”—a key question at the heart of the lawsuit, which the Supreme Court is preparing to hear on March 4.

Reporters on the health-care beat have been covering the conservative case against the Affordable Care Act subsidies for years, but in the last few weeks, there’s been an increased effort to dig into what Congress intended and who the four Virginians who apparently want to unburden millions of people of their subsidized health insurance really are.  

And while the New Republic, Mother Jones, Salon, and others have all raised important questions about the validity of the case and its defendants, it’s not just left-leaning outlets analyzing King v. Burwell. The Wall Street Journalwhose editorial board has been critical of the health-care law in the past, reported this week that three of the four plaintiffs in the case might not have valid legal grounds to sue. 

As the media continues to dig, the focus has centered on two questions. First, did lawmakers intend for subsidies to entice states to create their own exchanges, or were subsidies always intended to be universal? And second, do the plaintiffs have standing? In other words, do the four people suing over subsidies have a legal basis to claim that they are harmed by subsidized insurance? Here’s the major evidence that journalists have turned up in the last few weeks.

What did Congress mean?

The main question in the King case is whether Congress intended for states using the federal exchange to have access to tax credits, or if the credits were meant to be a reward for creating a state-based exchange. Over the last few years, and especially in recent months, we’ve seen evidence from both sides attempting to prove what lawmakers intended.

Here are the facts. The Affordable Care Act amended the IRS tax code to provide subsidies for plans “which were enrolled in through an Exchange established by the State under 1311.” Section 1311 lays out guidelines for states to create their own exchanges, and doesn’t mention a federal exchange. The Obama administration argues that this is a drafting issue and that it was never Congress’s intent to deprive states of subsidies. A later section gives the Health and Human Services secretary the power to “establish and operate such Exchange within the State.” The conservative groups and people suing the administration, led by the Competitive Enterprise Institute, argue that Congress wanted to use the subsidies to reward states that built their own exchanges.

Each piece of evidence speaks to lawmakers’ intent, which is why the Gruber video was so powerful—here was the guy who helped create Obamacare saying that the subsidies were a reward, or a threat to build an exchange, or else lose out on millions of federal dollars. But while Gruber got the most attention, there are also plenty of other things—e-mails between reporters and staffers, past statements from lawmakers, and votes in Congress—that give credence to the idea the bill was just sloppily written. 

The best pieces of evidence are times when Republicans, whose opposition to Obamacare has been consistent, proved inconsistent in the way they interpreted the law. For example, Senator John Barrasso of Wyoming told the Washington Examiner last month that “a reading of the law is very clear…if a state chose not to set up a state exchange, people from those states were not supposed to get subsidies.” But as Simon Maloy at Salon wrote last month, in 2011 Barrasso said the administration would end up paying $900 billion in subsidies when people left their employer plans for the exchanges. Maloy wrote: 

Significantly, FactCheck.org asked Barrasso’s office where that $900 billion number came from, and they pointed to another Op-Ed by Sen. Ron Johnson and Douglas Holtz-Eakin, who arrived at that total by assuming that every single worker in America will drop out of employer-sponsored coverage and purchase insurance through the state exchanges. 

By that point it was clear there wouldn’t be an exchange in every state. But Barrasso isn’t the only one whose memory doesn’t stretch back to 2011. Brian Beutler at the New Republic noted last month that all but three Republicans who were in Congress in 2011 voted for a bill premised on the idea that subsidies were universal. Republicans and Democrats banded together to repeal a rule that would have “significantly expanded the number of expenses businesses are required to report to the IRS,” Beutler wrote.

To pay for the lost revenues, Congress added rules calling for the government to aggressively collect money from people who received too much subsidy money. This happened after several states said they weren’t going to build exchanges, and when the Congressional Budget Office estimated how much money retrieving overpaid subsidies would generate, it assumed that all states would be eligible for subsidies. That was the estimate Congress used when it passed the bill. 

This all comes in addition to a pile of communication between reporters and government officials on both sides of the aisle that support the administration’s argument. Last week Greg Sargent, a left-leaning blogger at the Washington Post, interviewed a Republican-appointed member of the Virginia Health Reform Initiative panel and a Republican state senator who was for building an exchange. Neither thought their state would lose subsidies if it didn’t build an exchange.

Who’s hurt by Obamacare?

As Stephanie Mencimer at Mother Jones and several reporters at the Wall Street Journal have reported within the last week, there are serious questions about the standing of three of the four plaintiffs. A fourth plaintiff is four months away from qualifying for Medicare, at which point she would also lack standing.

The plaintiffs argue that Obamacare subsidies hurt them by subjecting them to the individual mandate fine. Here’s how the Fourth Circuit Court of Appeals, which ruled in favor of the government, put the argument in its July 2014 opinion:

The unaffordability exemption kicks in when the cheapest available plan is more than 8 percent of a consumer’s income. The plaintiffs, according to the opinion, argue that subsidies are a “financial burden because they are forced either to purchase insurance or pay the penalty.” While the appeals court found the argument “counterintuitive,” it agreed that the plaintiffs had standing. From the opinion:

Since July, and especially since last week, more information has turned up on the plaintiffs’ standing. Mother Jones wrote that David King, the 64-year-old lead plaintiff, made $39,000 when the suit was filed, and the cheapest plan available to him would have cost $275 (he’s older and a smoker)—nearly 12 percent of his income. 

On top of that, as the Journal reported, King is a Vietnam war veteran, meaning it’s very likely that he qualifies for free care. King “expressed negative opinions about veterans care,” according to the Journal, but the point of the lawsuit seems to be the mandate, not the quality of insurance. Another plaintiff, Doug Hurst, a 63-year-old, is also a Vietnam war veteran who likely is eligible for free care.

Rose Luck, 56, used a motel as her address in court filings. That address, along with her income, was used to determine how much her insurance and subsidies would be. Mencimer argued that “according to government filings, the cheapest plan available to her on the exchange cost $332 per month,” nearly 9 percent of her income of $45,000 at the time. In other words, she also appears to lack standing.

The plaintiffs' lawyers disputed the suggestion that their clients lacked standing or that they misrepresented any facts. Lead associate Yaakov Roth told the Journal that even if King and Hurst are eligible for benefits (and they believe King is not), they weren’t technically eligible because neither had enrolled when the suit was filed. On the subject of Luck and her residency, CEI spokeswoman Annie Dwyer told the Journal that they were aware she’d used a motel as her address, but “the lawyers are not concerned about standing issues.” 

The fourth plaintiff is Brenda Levy, a 64-year-old substitute teacher and former Mother Jones reader who, according to Mencimer, seemed pretty unaware of what she had become part of. She couldn’t remember how she got involved in the case and didn’t know that her story was being used to jeopardize subsidies for millions of Americans. “I don’t want things to be more difficult for people,” she told Mother Jones. “I don’t like the idea of throwing people off their health insurance.” There are also questions about Levy’s income. According to the Journal, her employer, as listed on court papers, said that she only made $10,000, which would make her exempt from the mandate. Levy didn’t reply to questions from the paper on her income, but CEI argued that “there is no reason to assume that substitute teaching is her only or principal source of income.”

The Journal noted that while that the issue of Luck and King possibly lacking standing due to their low incomes had been brought up in the past, the Fourth Circuit didn’t address it. But even if three of the four plaintiffs lack standing, it only takes one to keep the case going. Instead, the numerous exceptions the plaintiffs seem to qualify for only weakens the argument against the law, especially in the eyes of people who are inclined to be critical of the lawsuit. If subsidized health care is hurting so many people, one might ask, why is it so hard to find people who are unquestionably hurt by it?

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