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Wednesday, November 12, 2014

What will happen if SCOTUS strikes down Obamacare federal subsidies?

by Gaius Publius

As you may know, the Supreme Court recently decided to hear another ACA (Obamacare) case, this one also crafted by the right wing to gut the law. At risk are subsidies and tax credits given to people who buy insurance on the federal exchanges, as opposed to the state exchanges. Igor Volsky at Think Progress (h/t Ken at DWT):
[The suit] could result in serious implications for Obamacare beneficiaries and the 36 states that have refused to establish their own exchanges. In fact, should the Supreme Court eliminate the tax credits for the millions who have enrolled in coverage through the federally-run marketplaces, the consequences wouldn’t be too dissimilar from stripping out the law’s individual mandate — something the justices refused to do in 2012. 
Read for more detail if you want it. Volsky does a good job laying out the specifics of the lawsuit. More detail here as well.

The "news" part of this news is that the Court gets to take another run at Obamacare, another shot at neutering it. But that's not what I want to point to. Volsky's article also looks down the road at specific consequences if the suit succeeds. Unlike Volsky, who makes six points, I want to make just three.

■ These are the consequences as Volsky sees them:
1. Millions of people [in no-exchange red states] will see triple digit premium hikes. ...

2. Millions of people [in no-exchange red states] will lose health care coverage. ...

3. Obamacare will face a death spiral. ...

4. Insurers will advocate for repealing market protections. ...

5. States [i.e., no-exchange red states] will lose billions of dollars. ...

6. The health of Americans living in [no-exchange] red states will worsen. ...
■ Most or all of the people who will be effected in Volsky's points 1, 2, 5 and 6 are people living in red states where elected state governments have rejected setting up state exchanges:
While states with state-run marketplaces won’t experience a disruption, those that allowed the federal government to build their exchanges will. The latter are mostly run by Republican-leaning lawmakers and already have higher numbers of uninsured on average. A ruling in favor of the plaintiffs would thus perpetuate a health care divide between so-called blue and red states. 
■  The effect of this red-state disruption creates Volsky's points 3 and 4, which might (but won't necessarily) spell the end of Obamacare. Because:
Eliminating the subsidies increases costs and discourages healthy people from remaining insured, leading to even higher premium increases and a very expensive risk pool full of sicker — and by definition more expensive — beneficiaries.
[I]f the pool of beneficiaries shrinks as coverage without subsidies becomes too expensive for healthy individuals, insurers will likely advocate to repeal these protections. The industry has spent millions on lobbying and political contributions guaranteeing that Congress will be more than happy to listen to its demands.
This leads to a number of questions. Will the Roberts Court pull the trigger on red-state health insurance, and pull even more of the mask off its wealth-serving self? I'd hate to see the first occur, but if Roberts does do that, I'd welcome the second. The Roberts Court is arguable the worst since the start of the last century. I'd be pleased to have that be obvious. A revolt against that Court, a real one, is long overdue.

And what about voters for red-state governments who refuse to allow their own, often poor, citizens to be insured? Again, I'd hate to see it — human suffering is never a good thing — but hastening the fall of red state governments via voter revolt might solve other problems going forward. (And frankly, don't people have the right to choose their government, and also experience the real consequences of that choice, especially in red states? Sometimes experiencing consequences is a good thing, especially if prëemptive thoughtful examination fails to work.)

And finally, Obamacare itself, for all the good it does, is designed as a profit-protection program with a government guarantee. I would not vote to destroy it at this point (at least I don't think I would), but in a perfect progressive world, replacing it with actual Medicare would be a net positive. We may never again have a moment like Obama had in 2008 — a Democratic president with an FDR Congress and an FDR mandate — a moment that Obama, by the way, totally threw away. But if we had it to do over, I'd want enough spine in the Congressional Progressive Caucus to force the single-payer (Medicare for All) issue to its conclusion. I'm certain if the hardball choice was "Medicare or nothing," the whole country would jump for joy, and Medicare.

None of us is in control, of course; these are just thoughts. Red state voters will do what they want, and the Roberts Court will do what it wants — all independent of our wishes or even our existence. So consider this a scorecard for when the actual contest is held. Arguments are expected in February or March with a decision in June or so. Here's what's at stake. Stay tuned.