More Tea Leaves Reading on King v. Burwell


The lawyers weighed in last time. This time it’s the healthcare policy wonks.

As stated in my last post, Reading the Tea Leaves of King v. Burwell, everyone is trying to discern how the Supreme Court will decide this critical case concerning the subsidies for healthcare insurance on the ObamaCare federal exchange. Last week I discussed Oklahoma Attorney General Scott Pruitt’s reaction to questions posed by Justice Anthony Kennedy. Today we’ll consider the opinion of a healthcare policy analyst.

Avik Roy, senior fellow at The Manhattan Institute, writes a regular healthcare blog called The Apothecary. Roy is a premier analyst of ObamaCare and the author of an alternative to ObamaCare called Transcending ObamaCare.

Seven Reasons to Support King

The principle argument seems to center around the idea that a finding for King would violate the constitution’s principles of federalism. This argument was proposed by liberal Yale law professor Abbe Gluck, former clerk to Justice Ruth Bader Ginsburg.

Roy gives seven reasons why her argument will fail to convince Justice Kennedy:

  1. Can ObamaCare’s insurance regulations function without subsidies? Of course they can

The argument that havoc and destruction will ensure if subsidies go away is simply factually wrong. There will remain an Individual Mandate, forcing many people to purchase health coverage regardless of their eligibility for subsidies. It’s true that in a subsidy-free state, average premiums would likely go up, and that fewer people would enroll in ObamaCare than originally hoped. But guess what? That has already happened, even with federal exchange subsidies.

ObamaCare’s mandates and regulations have already led younger and  healthier people to stay away from the exchanges. Insurance wonks call this “adverse selection.” When fewer healthy young patients enroll, the pool of those insured becomes adversely impacted – which raises premiums for the rest. Indeed, enrollment in the exchanges has skewed around 25 percent older than one would expect without adverse selection.

The result –  underlying premiums have skyrocketed; the Manhattan Institute analysis found that non-group premiums increased by 49 percent in the average county.


Percentage Selecting Plans

This graph shows that despite the Individual Mandate, many young people have refused to enroll in ObamaCare causing “adverse selection.” Compare the first two bars for each age group with the last bar – which reflects enrollment after ObamaCare. Enrollment is less in each except for those over the age of 55 years.

The Obama administration argues that striking down the subsidies will cause chaos and “adverse selection.” But this has already happened!

  1. If exchanges without subsidies wasn’t Congress’ intent, why are there no subsidies for U.S. territories?

The government argument that ObamaCare’s insurance regulations, without subsidies, is an obvious disaster that Congress would never have intended. If so, then why did Congress force U.S. territories like Guam and the Virgin Islands to do exactly that?

Furthermore, ObamaCare originally contained a provision called the CLASS Act – a national plan for long-term care insurance championed by Ted Kennedy. Even HHS Secretary Kathleen Sebelius called this “totally unsustainable”.  The government argues that Congress could never have intended to create an unworkable healthcare program. Yet Congress did exactly that when it created the CLASS Act.

  1. Is awarding trillions of dollars for state exchanges “punitive?” No

The government is arguing that the strict wording of the statute is punitive. Roy points out the absurdity of this argument. The subsidies are clearly a “carrot,” not a “stick”.  A punitive system would be: if you don’t set up an exchange we’ll stop sending you the taxpayer dollars you are already receiving.

This was tried by the Obama administration in the original wording of the law concerning expansion of Medicaid. The government tried to take away federal support of Medicaid from any state that did not agree to expand Medicaid under ObamaCare.  The Supreme Court struck down this portion of the law in its ruling in June, 2012, making Medicaid expansion voluntary.

  1. Are ObamaCare’s insurance regulations punitive? Yes

If the Supreme Court wants to argue that ObamaCare’s insurance regulations are punitive, the remedy isn’t to appropriate trillions of taxpayer dollars that congress didn’t authorize. It’s to overturn the insurance regulations that the Court considers punitive.

  1. Why did eight states argue that they prefer not to set up exchanges, even without subsidies?

Eight states filed amicus briefs in favor of the challengers, arguing that they did not want to build exchanges and didn’t want subsidies. Clearly these eight states didn’t find such a regime oppressive, or they wouldn’t have voluntarily chosen it.

One brief said, “Significantly, the federal government’s payment of a subsidy – for even a single employee – triggers costly obligations for employers within that State, placing such states at a competitive disadvantage in employment,” due to ObamaCare’s Employer Mandate. In addition, the law’s Individual Mandate has less bite in a subsidy-less environment, due to the fact that the Individual Mandate only applies in instances where someone’s net premium costs are below an income-related threshold. (If the cost of the premium exceeds 8 percent of income, the individual is exempt from ObamaCare.)

  1. Obama’s Solicitor General didn’t embrace the “faux federalism” argument.

When questioned by Justice Samuel Alito, Solicitor General Donald Verilli did not seem to agree with the Gluck argument. He responded, “I think that I’m not prepared to say to the Court today that it is unconstitutional. It would be my duty to defend the statute and on the authority of New York v. United States, I think we would do so.”

  1. In the Affordable Care Act, “state flexibility” is a lie.

Lastly, Verilli several times made mention of the ACA’s citation of “state flexibility.” The challengers’ reading of the law, he says, “makes a mockery of the statute’s express textual promise of state flexibility.”

Roy strongly denounces this argument:

“Do you know what is the “polar opposite” of state flexibility? ObamaCare. The law imposes a one-size-fits-all regulatory framework on states that enjoyed broad sovereignty in this area for the previous 234 years of American history. Indeed, the most novel aspect of ObamaCare, as a matter of law, is the degree to which it undermines state flexibility by creating an entirely new layer of federal insurance regulation. And yet the President’s top lawyer is arguing that “state flexibility” is the reason why ObamaCare has been implemented in the way it has.”

Ideology has a way of blinding one to reality. Hopefully, the Supreme Court will simply interpret the law and not be swayed by those whose ideology has distorted their vision.

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