Supreme Court to hear Obamacare subsidy case

Story updated at 6:45 p.m. EST

The U.S. Supreme Court announced Friday it will hear King v. Burwell, a case that many say could gut the nation's Patient Protection and Affordable Care Act, leaving millions of Americans uninsured.

The question in King v. Burwell is whether the language of the act allows consumers to receive premium tax credits in states that have not established their own exchanges and instead are relying on HealthCare.gov. Many states have not created their own exchanges.

One part of the law says the tax credits are available only to Americans who enrolled “through an exchange established by the state.” But the Obama administration argues that the law's clear intention was to offer subsidies and expand coverage to Americans in every state, and that other sections of the law indicate that subsidies are available to people in states served by the federal exchange.

The White House said Friday that the law is working just as Congress intended.

“This lawsuit reflects just another partisan attempt to undermine the Affordable Care Act and to strip millions of American families of tax credits that Congress intended for them to have,” the president's press secretary, Josh Earnest, said in a statement

Michael Cannon, director of health policy studies for the Cato Institute and a key figure behind the legal challenges to the subsidies, said in a statement that the “decision is a rebuke to the Obama administration and its defenders, who dismissed as frivolous the plaintiffs' efforts to defend their right not to be taxed without congressional authorization.”

In July, a 4th U.S. Circuit Court of Appeals panel in Virginia unanimously ruled in favor of the administration in King v. Burwell, saying subsidies should be allowed in all 50 states. The plaintiffs in the King case appealed to the Supreme Court.

Experts say that without the subsidies, many Americans who are now covered through the federal exchange would no longer be able to afford insurance. It's likely healthy people would then stop paying their premiums, leaving only sick people in the exchanges, which could in turn hurt insurance company bottom lines.

The prospect of subsidies being wiped out in states without their own exchanges could spur more states to establish marketplaces. But they'll have almost no time to act if they want federal assistance: the deadline for applying to the CMS for funds to establish their own exchange is Nov. 14.

Illinois is one of the few states that has been considering establishing its own exchange. Supporters of a state-based marketplace are hoping to push it through when the Legislature convenes for a short “veto only” session starting on Nov. 19.

Jillian Phillips, director of policy and government relations for the Campaign for Better Health Care, which has been lobbying for a state-based exchange in Illinois, said that she hopes the CMS will show some flexibility in the deadline to apply for federal grant dollars. Phillips also believes the specter of the Supreme Court striking down subsidies will change the political dynamic in Illinois.

“I do think it makes a big difference,” Phillips said. “If we're looking at several hundred thousand people losing their ability to afford private insurance plans, I would hope that would strongly motivate our Legislature to step up.”

Though it's unclear how the Supreme Court might ultimately rule in the case, four conservative justices already signaled their dislike of the healthcare reform law in their dissents in the 2012 case National Federation of Independent Business v. Sebelius, which narrowly upheld the constitutionality of the law.

The decision to take up the case comes just one week before the second open enrollment period begins. That raises the specter that it could sow confusion about the availability of subsidies among potential exchange customers.

Kathleen Oestreich, CEO of Meritus, a not-for-profit co-op insurer in Arizona, said she worried that it will generate a lot of “noise and confusion” for consumers seeking to enroll in coverage. “What it means is the rest of us have to work doubly hard to make sure people understand there are still subsidies available,” Oestreich said.

Katherine Hempstead, who directs coverage activities for the Robert Wood Johnson Foundation, expressed less concern about the potential negative ramifications on the open-enrollment period. "This impending hearing will probably seem pretty abstract and far-off to lots of folks,” Hempstead said. “People living in states with the federal exchange who want health insurance and are hoping to get a tax credit will probably proceed with those plans. And there is no reason why they shouldn't."

The Federation of American Hospitals, a trade group that represents investor-owned hospitals, said the organization is confident that the court will side with the Obama administration's interpretation of what Congress intended. “Its decision to hear the appeal during its current term simply means that this confirmation will come sooner rather than later,” FAH CEO Chip Kahn said in a statement.

A number of other cases concerning the subsidies also are working their way through the courts, including Halbig v. Burwell. In that case, a panel of the U.S. Circuit Court of Appeals for the District of Columbia ruled in a split decision that subsidies should not be allowed in states without their own exchanges. But that decision was vacated in September when the D.C. Circuit Court decided to hear the case en banc. Oral arguments in that case are scheduled to start Dec. 17.

The Supreme Court's decision to hear King v. Burwell followed a scheduled discussion about the matter in the justice's private conference Friday. It was the second time the justices had conferenced about the case. They took no action on whether or not to hear it after the first conference Oct. 31.

Court watchers believe the majority could swing either way on the matter. It's possible, though, that recent Republican victories will embolden the court to rule against the subsidies, said Kermit Roosevelt, a constitutional law expert at the University of Pennsylvania Law School.

“The Supreme Court is in some ways at least cognizant of, if not directly responsive to, public opinion,” Roosevelt said. “So when you have the Republican Party voicing strong opposition to the Affordable Care Act, and then you have voters delivering a pretty big win for the public in the midterms, I think that would make the justices more comfortable ruling against it.”

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