Those challenging the federal exchange subsidies in President Obama’s healthcare law should be nervous following Wednesday’s oral arguments before the Supreme Court.
On several occasions, Justice Anthony Kennedy, who is seen as a swing vote, said that if those challenging the Obama administration get their way, it would raise “a serious constitutional question” about the federal government’s power to coerce states.
At issue in the case, King v. Burwell, are the subsidies that the federal government provides for individuals purchasing insurance through Obamacare. Though the text of the law says the subsidies were to go to individuals obtaining insurance through an “exchange established by the state,” a rule released by the Internal Revenue Service subsequently instructed that subsidies would also apply to exchanges set up on behalf of states by the federal government.
The plaintiffs in the case, represented by Michael Carvin, have argued that the authors of Obamacare intended to withhold subsidies from those states that didn’t set up their own exchanges as an incentive for them to do so.
But that interpretation, Kennedy said, would raise questions relating to the sovereignty of states.
Solicitor General Donald Verrilli Jr., speaking on behalf of the Obama administration, seized on this point, arguing, “Our reading is the pro-federalism ruling.”
Justice Samuel Alito was more sympathetic to the challengers. He argued that in past cases, the Court has deemed it coercive if the federal government sets consequences for states regarding certain decisions, but then doesn’t realize those consequences because they aren’t clear. However, in this case, he said, states still have the option of setting up exchanges and getting subsidies.
Carvin argued that the government interpretation of the law is actually the more intrusive, because of the mandates.
Obamacare’s fines against employers that do not offer health insurance coverage are triggered when a worker claims government subsidies to purchase insurance on an exchange — but in states where workers can no longer legally receive those subsidies, then there are no fines.
Carvin argued that under the Obama administration’s interpretation of the law, the federal government is able to unilaterally make decisions about the personnel policies of businesses in every state.
Most of the other justices fell in predictable lines, with Justices Stephen Breyer, Elena Kagan, and Sonya Sotomayor, skeptical of the challengers and Alito, along with Antonin Scalia, more sympathetic.
Justice Ruth Bader Ginsburg even raised issues as to whether the plaintiffs had standing to sue in the first place.
Chief Justice John Roberts kept his cards close to the vest, and barely spoke during the arguments.
Obviously, the typical caveat applies that it’s impossible to predict how justices will ultimately rule based on oral arguments.
If justices invalidate the IRS rule, then it would mean that millions of Americans in up to 37 states that did not set up their own exchanges would lose their insurance subsidies and be exposed to the full sticker price of Obamacare plans. On the flip side, taxpayers could stand to save hundreds of billions of dollars of subsidy money that would no longer have to be paid out.
Additionally, the individual mandate exempts those who can’t find health insurance options for less than 8 percent of their income — thus, if the subsidies are eliminated, more people will be able to claim this exemption.
