The conservative think tanks behind King v. Burwell aren't the only ones giving a close reading to the Affordable Care Act's text.
The Obama administration says it has no contingency plan should the Supreme Court bar health insurance subsidies in states that failed to set up their own exchanges. If true, the president's legal team should take a look at an article published in early January by a Harvard law student, whose own close reading of the law says there is a perfectly legal and relatively easy workaround.
Writing in the student-run Harvard Journal on Legislation, Freilich Jones, JD16, says a section buried deep in the law gives HHS Secretary Sylvia Burwell the authority to set up an exchange for a state either “directly or through an agreement with a not-for-profit entity” (emphasis added by Jones). Elsewhere in the law, exchanges are defined as “a government agency or nonprofit entity that is established by a state.”
In other words, it all depends on what the meaning of the word “a” is.
Put the two phrases together and they give the federal government the right to subcontract operations of HealthCare.gov, which is running the exchanges for 37 states, with a nonprofit entity created by any one of those states, Jones claims. The workaround “depends on a very literal reading of the text of the ACA, precisely the sort of reading that the Supreme Court is almost certain to endorse if it finds for the plaintiffs in King.”
At present, seven states (California, Connecticut, Delaware, Hawaii, Oregon, Rhode Island, and Vermont) have legislatures and a governor's mansion controlled by Democrats. They would no doubt be amenable to setting up the non-profit entity. Hawaii's exchange is already run by a government-initiated nonprofit.
Jones has already anticipated the legal attack that would be launched against any such move by the Obama administration. The main one is that while the law allows multi-state exchanges, it gives states the right to approve any multi-state exchange operating within its borders.
Since it's unlikely Republican-run states would grant such approvals, the workaround would entail setting up the nonprofit state exchange as an umbrella holding company with subsidiaries to serve a “geographically distinct area,” which the law's language also allows. Each geographically distinct area would correspond with the borders of a state.
“By incorporating the entire federal exchange operation into a not-for-profit health exchange system created by one of the states,” Jones concludes, “the Obama Administration would ensure that health tax credits could flow to all eligible taxpayers no matter their state of residence.”
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