King v. Burwell: Everything You Need To Know

June 24, 2015

Topics: Health Care Reform, Legal Issues, Exchanges, Access to Care

The Supreme Court is poised to rule in King v. Burwell, which challenges the Affordable Care Act's subsidies to help U.S. residents purchase coverage through the federal exchange. Below, American Health Line rounds up all you need to know about the case ahead of the ruling, from the facts of the case to potential solutions if the subsidies are invalidated.

Arguments in the Case

At issue in the case is that while the ACA says subsidies are available to help certain U.S. residents purchase coverage offered "through an exchange established by the State," a May 2012 IRS rule allows the subsidies to be used in an exchange administered either by a state or the federal government.

The plaintiffs in the case argue the IRS rule should be invalidated because it contradicts what Congress originally wrote in the ACA. Further, the plaintiffs argue the ACA's subsidies harm them by making them subject to the law's individual mandate and that without the subsidies, they would receive an affordability exemption.

Meanwhile, the Department of Justice argues Congress would not have set up such an intricate connection between the law's individual mandate and the subsidies if it intended for the subsidies to not be available in certain states.

If the court strikes down the federal exchange subsidies, the ruling would eliminate about $28.8 billion in subsidies to 9.3 million individuals in 34 states in 2016, according to an Urban Institute analysis.

Where the Justices Stand

During oral arguments held on the case in May, the high court's four liberal justices seemed to express strong support for the subsidies. For example, Justices Stephen Breyer and Elena Kagan said the law when read as a whole is clear that the subsidies should be available to individuals purchasing coverage through the federal exchange. Further, Justice Sonia Sotomayor warned that a ruling striking down the subsidies could cause a "death spiral" in the individual market, which the ACA "was enacted to avoid."

In addition, Justice Ruth Bader Ginsburg questioned whether all of the plaintiffs in the case have the standing to bring the subsidies challenge. She noted the court should know whether any of the plaintiffs have a "concrete stake" in the case's outcome.

However, lawyers for the plaintiffs argued that only one of the plaintiffs needs to have standing to bring the challenge. Further, Justice Samuel Alito and Chief Justice John Roberts seemed skeptical that the issue of standing was important.

Meanwhile, Alito and Justice Antonin Scalia focused mostly on the ACA's text and seemed critical of the Obama administration's position. Scalia noted the ACA "means what it says," even if that means "disastrous consequences." He continued, "I mean, it may not be the statute [Congress] intended," but "[t]he question is whether it's the statute that they wrote."

Alito and Scalia added that Congress or the affected states could act to remedy the issue if the subsidies are ruled illegal.

Justice Anthony Kennedy, a conservative member of the court, made statements indicating he could be swayed to both sides of the case, and while he expressed opinions supporting both the plaintiffs' and defense's arguments, he did not seem to commit to either side of the case.

Roberts stayed mostly quiet during the arguments and did not indicate his opinion. Roberts' was the vote that upheld the ACA the first time it faced a major challenge in 2012. In addition, Justice Clarence Thomas did not ask any questions during the arguments, which is usual for him.

Plans To Address Potential Fallout if the Subsidies Are Struck Down

The Obama Administration

The Obama administration has repeatedly said it does not have a contingency plan if the subsidies are struck down by the Supreme Court. At a House Ways and Means Committee hearing last week, HHS Secretary Sylvia Mathews Burwell said it would be the responsibility of Congress and state officials to address the fallout from such a ruling.

However, some observers have said the administration could be deliberately avoiding discussing such a plan as a way to increase the chances the Supreme Court will uphold the subsidies. Former CMS Administrator Tom Scully said of the administration, "Of course, they have [a plan], they should all resign if they don't," adding, "and they certainly should not discuss it either."

Republican Lawmakers

Meanwhile, Republican lawmakers have been working toward a backup plan that would allow individuals to temporarily keep the subsidies. For example, Donald Stewart, a spokesperson for Senate Majority Leader Mitch McConnell (R-Ky.), said Republican leaders have been working toward "a responsible approach to protect families."

However, other observers have said GOP lawmakers have not come to an agreement on such a proposal.

GOP House and Senate leaders on Wednesday met with members of their party to discuss potential contingency plans. Stewart called the meetings "the latest in a series of briefings with our members."

The States

In addition, many states that would be affected by a ruling striking down the subsidies have been "panicked" over the lack of a contingency plan from the Obama administration. Many state officials hope the administration or Congress would address any issues with a ruling striking down the subsidies. Further, some governors and lawmakers have said they would consider creating a state-run exchange but could face opposition from Republican lawmakers in state legislatures. Among states currently using the federal exchange, 26 have Republican governors and many have Republican-held legislatures.

Earlier this week, HHS granted conditional approval for state-run exchanges in Arkansas, Delaware and Pennsylvania if the subsidies are struck down. Delaware and Pennsylvania received approval to run state exchanges for individual and small group markets in 2016. Meanwhile, Arkansas received approval to run a state exchange for the small group market in 2016 and the individual market in 2017.

In addition, HHS wrote in a statement that the agency would "continue to work collaboratively with states to provide the guidance and assistance they need to help consumers and small businesses compare and sign up for affordable private health insurance plans."

Democrats

Senate Democrats on Tuesday said they are ready to respond promptly with a legislative solution should the Supreme Court strike down the subsidies. Sen. Dick Durbin (D-Ill.) said if the court strikes down the subsidies, Democrats would suggest short legislation that states federal exchange enrollees are eligible for the subsidies. Durbin said, "It's one sentence and it's already been written," adding, "I hope we don't need it."

-- by Ashley Fuoco Antonelli, Senior Staff Writer