After countless hours of courtroom argument, dozens of briefs, and seemingly endless legal maneuvering, the fate of President Obama’s Affordable Care Act comes down to the meaning of six simple words.
On June 28, 2012, when the U.S. Supreme Court first narrowly upheld the law, it seemed the bitter struggle over Obama’s huge expansion of federally funded health care had come to an end.
But the calm was short-lived.
Within a few months, conservative legal theorists seized on a little-noticed sentence in the law that seemed to limit federal assistance for consumers to buy health insurance purchased on state-established exchanges, or marketplaces. People in states that declined to set up their own exchanges, and instead bought insurance on the federal government’s exchange, were legally ineligible for aid, the legal critics said.
Now, with the Supreme Court set within days to rule on that challenge in a closely watched case known as King v. Burwell, supporters worry that language in the law limiting subsidies to “an exchange established by the state” could become the basis for eliminating health insurance for millions.
If the law is struck down, it is estimated, as many as 8.2 million people who obtained health insurance through the federal exchange will lose coverage.
Thirty-four states, including Pennsylvania, New Jersey, and Delaware, have so far declined to set up their own exchanges, instead relying on the federal exchange. Pennsylvania and Delaware recently have moved to develop exchanges because of the uncertainty over the subsidy issue, and last week received preliminary approval from the Obama administration to create their own.
The Urban Institute, a liberal think tank based in Washington, estimates that absent state exchanges, 329,000 people would lose health insurance in Pennsylvania, along with 24,000 in Delaware and 239,000 in New Jersey.
Hospitals and insurers that are counting on revenue from an influx of newly insured patients also would take a hit if the challengers’ position is upheld.
“The court has a way of surprising on cases like this,” said Michael Moreland, vice dean of the Villanova University School of Law. “You may end up with an odd coalition on one side of the court or another.”
Obama, in remarks at a news conference in Germany on June 8, lashed out at the Supreme Court for even deciding to hear the case, saying it had little legal merit.
Yet, legal experts say the conservative challenge isn’t quite as fanciful as the president suggests.
Last year, the U.S. Court of Appeals for the Fourth Circuit endorsed the government’s arguments and upheld the law, saying insurance subsidies could be paid both through state and federal exchanges.
But the circuit court said it was a close call.
“There is no question that there is a certain sense to the plaintiffs’ position,” according to the Fourth Circuit’s ruling. In the end, that court ruled in favor of the government, citing case law mandating that when there are multiple possible interpretations, the agency that administers the law has the final say.
Even legal scholars who support the Affordable Care Act say the conservatives’ legal argument has some weight.
“It’s not crazy,” said Robert Reinstein, a constitutional law professor at Temple University Law School, whose writing was cited in a June 8 Supreme Court decision upholding the president’s authority to recognize foreign governments.
Reinstein said the government’s legal arguments are convincing and the law should be upheld. But he points out there is reason for Affordable Care Act supporters to worry because the Supreme Court seems to have gone out of its way to take the case. He bases his conclusion on the fact that the high court agreed to take up the issue, even though there was no split among lower courts, often a threshold requirement for taking a case.
“There are four justices on the court who clearly dislike this law and they are very unsympathetic,” Reinstein said.
The origin of the case dates to 2011 and the research of Michael Cannon, an economist and health policy analyst at the Cato Institute, a libertarian think tank in Washington, and Jonathan Adler, a law professor at Case Western Reserve University. Cannon said it was Adler who first came across language that seemed to limit subsidies to state-established exchanges, and the two decided to explore the issue further.
At first, Cannon said, he was convinced the language was a drafting error. But the more he and Adler dug into the legislative history, the more he came to think Congress intended to restrict health subsidies to state exchanges.
The reason, he said, is at the time the bill was drafted, some Senate Democrats, notably Ben Nelson of Nebraska, voiced concerns that allowing the federal government to operate a health-insurance exchange would give it too much power. The language giving states sole authority to establish exchanges was added to placate those Democrats, Cannon says.
But if that is so, why have federal exchanges in the law?
Cannon argues the congressional drafters never intended for the Senate bill to become law. The idea was that after the House and Senate passed their versions of the health reform bill, differences would be ironed out in a conference committee. The conference committee rewrite was to have been sent back to the House and Senate for final approval.
But Democratic congressional leaders got trapped by circumstances. After the Senate passed its initial version of the bill on Christmas Eve 2008, Scott Brown, in a special election in Massachusetts, was elected to the Senate as a Republican. That deprived Democrats of the 60-vote majority they needed under Senate rules to bring a bill up for a vote. Then Democrats were forced to take the Senate bill that had already passed and send it to the House for a final vote, flaws and all, where Democrats still held an effective majority.
They passed it on March 21, 2010, with all Republicans voting against it.
Democrats reject this analysis. Solicitor General Donald B. Verrilli Jr., in his brief urging the Supreme Court to uphold the law, said the statute – despite the language on state exchanges – clearly authorizes the federal government to set up exchanges if states fail to do so.
That, along with commentary during legislative debate that the goal was to create a nationwide safety net, shows that Congress never intended a two-tiered system, he wrote.
No matter how the high court decides, the issue is unlikely to go away. If the court upholds the law, conservatives no doubt will mount further challenges. If it is struck down, Moreland of Villanova law school foresees a scramble on Capitol Hill to either fix the law to comport with the decision or craft an alternative.
“In the event the court reads the statute narrowly to say there can be no subsidies on federal challenges, that will only be the first move,” he said. “That will put tremendous pressure on the president and Congress to come up with a fix.”
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