How Liberals Can Win Obamacare Challenge

A Supreme Court ruling barring federal subsidies in some states would be a devastating blow for the people who depend on them. But there might be a silver lining.

Don't we all?

Photographer: Jewel Samad/AFP/Getty Images

King v. Burwell, the case the Supreme Court just agreed to take up, could disrupt a crucial part of the Affordable Care Act, by blocking federal health-care subsidies in states that refuse to establish their own insurance exchanges.

Could there be a silver lining for liberals if the court decides against the government? I think so, but it's not pretty.

First, let's dispense with the idea that such a ruling would end Obamacare. Sure, the outlook would be grim in states that rely on federally run exchanges, where enrollees would end up paying the full cost of their coverage. That would lead the healthy to drop out, and in turn increase costs for everyone else. It's not impossible that the individual insurance markets in those states would collapse.

But in the 14 states (plus Washington, D.C.) that have established their own exchanges, a ruling against the government wouldn't change anything. Unless the court's decision leads Congress to revise or repeal the law, any state with its own exchange can carry on as before.

So the real losers if King prevails would be people in states whose governments insist on not setting up insurance exchanges. At the moment, there are 36 of those states, but some governors and lawmakers would almost certainly change course, having decided that refusing to build an exchange was a good way to oppose Obamacare when it cost them nothing, but stupid when it costs their residents health insurance.

That would leave a smaller number of states -- how many is anyone's guess -- where the governor and legislature simply refuse to be seen cooperating with Obamacare, whatever the consequences. The people who lose in that scenario are, generally speaking, those with incomes between 133 percent and 400 percent of the federal poverty line. Their access to subsidies, and quite possibly to coverage, would be gone.

Here's the thing: In general, voters in those income brackets are about as likely as not to vote Republican. And shouldn't elections have consequences?

Nationally, 47 percent of those with family incomes between $30,000 and $50,000 said they voted Republican in the House elections this week, along with 54 percent of those with family incomes of $50,000 to $100,000. That roughly aligns with the incomes that make one eligible for exchange subsidies in a family of four. And presumably the shares are higher in states that elected Republican governors and state legislators.

So about half the people who would lose if King prevailed voted for state lawmakers who have so far decided not to establish exchanges. That makes a state's decision to opt out of exchange subsidies different from opting out of the Medicaid expansion that Obamacare also provides for. In the latter case, poorer voters (who are disproportionately Democrats) are being denied health insurance by governments that, statistically speaking, they probably didn't vote for. In the former, roughly half the people are getting what they asked for.

For liberals with a paternalistic bent, that's still upsetting, because people who may not have appreciated or agreed with the importance of subsidies, and then lost their employer-sponsored insurance or underwent some other hardship, could find themselves suffering.

But if you accept that people ought to be able to choose their own fate, then the ability of governors and state legislators to effectively say no to federal insurance subsidies looks less unjust. And if the voters decide that electing opponents of Obamacare wasn't such a hot idea, they can always vote differently next time -- hence the potential silver lining.

Having said all that, I hope the subsidies survive. I'm one of those liberals with a paternalistic bent. 

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.