King vs. Burwell: Fears and Issues

In the previous two articles, I tried to illustrate the complexity of what seems like an open and shut case- one of statutory interpretation based on the clear wording of a law.  If the Supreme Court ever wanted to send a shot over the bow of an increasingly activist regulatory agency like the IRS and, by proxy, other agencies, then striking down the tax subsidies for insurance purchased on the federal exchange would be a nice vehicle.

One needs to be mindful of a couple of issues.  The first is the issue of standing.  Under Article III, the federal court system is reserved for cases and controversies where a plaintiff has suffered a harm or injury.  Over the years, Supreme Court precedence has expanded the definitions of “cases and controversies.”  For example, special interest groups regularly bring lawsuits into federal court to block certain actions or force action on the federal government when they themselves suffered no “harm.”  There is a lot in the news leading up to this oral argument that the plaintiffs in these cases- actually a consolidation of four different cases- lack standing to bring the suit in the first place.  The Left would like nothing more than for the Court to dismiss these cases for lack of standing and let the subsidies remain in place, thus saving Obamacare.

It is amazing to read the Leftist articles about this case.  While it is true that the conservative Competitive Enterprise Institute sought out plaintiffs, this tactic is hardly unique to conservative groups.  Liberal environmental groups regularly seek out “plaintiffs” to carry their agenda forward in the courts.  What upsets the Left is that the CEI used a Leftist tactic against a Leftist law.

To be sure, the Court can raise this issue of standing at any time although they failed to ask for written briefs on the issue prior to argument.  Any Justice can bring up the issue at oral argument or the Justice Department can bring it up when their turn comes.  On the off chance that the Court did dismiss this case for lack of standing- and they could do so in their final opinion or even after the Friday conference- there are similar cases pending in Indiana and Oklahoma where the issue of standing is clear-cut in favor of the plaintiffs and this case would likely return to the Court in the near future with a new name.  That may very well be an important point prodding the Court to move forward with this case to resolve the issue thus ending the cases in Indiana and Oklahoma one way or another.

It would seem strange that plaintiffs are contesting these subsidies in the first place.  After all, they are receiving a government benefit in the form of a subsidy to purchase health insurance.  The “harm” is that the health care exchange itself and the subsidies trigger another part of the law- the individual mandate to purchase insurance.  This is the harm alleged in the lawsuits.

And why is the Left so adamant about bringing this up?  They allege that two of the plaintiffs in these cases- David King and Douglas Hurst- are Vietnam veterans and eligible to receive health care benefits through the VA.  An important question is whether the mere eligibility to receive VA benefits necessarily precludes them from bringing suit against the law.  A third plaintiff- Rose Luck- has had her standing questioned given her last known address.  Health care premiums in the exchange are partially determined by one’s residence, or zip code, since there is variation in premiums depending upon that.  Her last known address was a hotel in Virginia near I-95.  The fourth plaintiff- Brenda Levy- is having her income questioned since she is a substitute teacher and because her annual income may be low enough, that would relieve her of falling under the mandate.  The CEI has countered that the affidavits submitted when the case was originally filed were truthful and reflected the reality of the plaintiffs at the time.  Most importantly, the Justice Department twice objected to these suits based on standing- at the District Court level and at the appellate level- and they lost both times.  My best guess is that the Supreme Court would defer to these lower courts since they are more familiar with the particulars of the facts.

Hence, as some lawyers have noted, this issue of standing is more academic than actual and represents a legal “kerfuffle.”  Even Neal Kaytal, a former Justice Department lawyer who handled the 2012 Obamacare cases, notes that this may be much ado about nothing and the Left is wasting time focusing on this issue.

The implications of this case are more important.  A ruling in favor of King, et. al. would strip an estimated 7.3 million people of subsidies by 2016.  That includes 1.1 million people in Texas alone and another 900,000 in Florida.  That is the number of people making 400% of the federal poverty rate and ineligible in their states to receive Medicaid benefits.  Because these people would effectively lose their health insurance because they would be unable to afford the premium absent the subsidy, what is left in the insurance pool are high health risk individuals with the associated higher costs.  The mandate along with the subsidy was intended to increase the insurance pool with healthy individuals to cover these higher costs.  Several studies have shown that the subsidy, NOT THE MANDATE, is the primary motivator in getting the uninsured insured.  The Rand Corporation estimates that without the federal subsidies, health insurance premiums would increase an average 43% across the board.

Additionally, both the individual and employer mandates would be rendered moot since they are dependent on people having the ability- through subsidies- to purchase insurance.  The penalties that employers face would kick in only when their employees go to the marketplace and purchase insurance with subsidies.  Without the subsidies, there can be no penalty against the employers and those penalties were intended to help offset the cost of the subsidies over time.

Some recent articles note that big business, especially the insurance industry, has filed briefs urging the Court to rule against King.  Of course they would.  The law effectively steers vast sums of government money into their coffers.  Is it any wonder that the insurance industry has seen a resurgence in profits of late?  Since many of the states that balked at a state-run exchange have also refused to expand Medicaid, the insurance industry stands to lose even more money if the subsidies are ruled illegal.

Citizens in Idaho, Washington, California, Colorado, Minnesota, Kentucky, Maryland, New York Vermont, Massachusetts, Connecticut and Rhode Island would be unaffected since those states run their own exchanges and their residents are eligible for the federal tax subsidy.  But, what about the residents of the other states?

Here, it gets tricky because Republicans opposed to Obamacare must then make an important decision: repeal and replace Obamacare which would reopen an intensely ugly fight on Capitol Hill and with the White House, or “fix” Obamacare by rewording the law to allow subsidies on the federal exchange in states that refuse to set up their own exchanges.  It is possible that based on the Court’s wording in their eventual ruling that certain states could potentially merge into the federal exchange such that it is viewed as a state-federal cooperative venture, or that states with the necessary IT infrastructure could also be considered a “state exchange” and eligible for the subsidies.  The doomsday figures cited by Left-leaning experts are for an all-or-nothing scenario.  In reality, the figures are likely less than those suggested depending on (1) if and how the Court defines a State-run exchange, and (2) how the individual states choose to react to the ruling.

No one disputes the fact that the clear wording of the law allows tax subsidies for those who purchase insurance on state-run exchanges.  There may simply be too much political pressure on state legislators to enact and set up a state exchange.  In the end, what the law failed to do- create an incentive for the state to establish an exchange- the Supreme Court may end up doing.  In that case, Obamacare would survive in whole.  Thus, it is vitally important that those most vociferous voices against Obamacare have a back up Plan B ready to go in Congress and at the state levels.  The main point is that should the Court rule in favor of King, it will reopen the debate over health care reform in this country.

For that reason, this case- other than the gay marriage case- will be the most important the Court decides this term.  They have, on occasion, opted to punt the issue down the line.  One such recent case was the Proposition 8 case.  Even the Windsor gay marriage decision merely delayed the issue.  To opt out of a definitive ruling in King would leave too many people hanging in the wind until another case inevitably reaches the Court, if they choose this road and rule the plaintiffs have no standing.  If they do, the subsidies will remain in place… for now.  Such a ruling would, however, do more potential damage to the Court’s image than Roberts is willing to risk.