Health+Benefits the May 2015 issue

Hog Heaven or Makin’ Bacon?

Opponents of Obamacare subsidies may have pushed the court to rule in their opponent’s favor.
By Scott Sinder Posted on April 30, 2015

One of the chairman’s admonitions was “pigs get fat, but hogs get slaughtered.” So our strategic goal is always to be piggish, not hoggish.

The plaintiffs’ counsel in the Supreme Court case, King v. Burwell, which could decide the future of Obamacare, appear to have disregarded the Bliley wisdom. That may ultimately do them in.

The Supreme Court heard oral arguments on March 4 and now we likely wait until the waning days the current session in late June for an answer. The prognosticators, however, are out in full force, reading every gesture and utterance as a potential clue to how this case ultimately will be resolved. At stake are Affordable Care Act subsidies for residents in the 34 states that do not have state-run exchanges.

And that, in my opinion, is the crux of the problem.  Nine of those states are “partnership” exchanges that opted to “establish” exchanges operated by the federal government. The ACA explicitly allows states to delegate operational functions.

So if the court rules for the plaintiffs, I believe one option for residents in the other 25 states with federal exchanges, is for them to elect to establish “partnership” exchanges with the federal government. In other words, if there is the political will, a state could continue to allow its poorer residents access to premium subsidies with the stroke of a pen.

The plaintiffs objective, though, is to eviscerate the law. They do not want to make it easy for states to solve the subsidies problem and they want to retain the ability to challenge the availability of the subsidies in partnership states. They want to make it hard.

Look at that through the lens of an oral argument. Although oral argument is not always a reliable indicator of the outcome of a case, it can provide insight into the justices’ thinking and how the votes are lining up.

What Happened

In most respects, everything we thought would happen happened.  Prior to March 4, pundits largely agreed that four liberal justices would side with the federal government and three conseravite justices would support the challengers. Oral argument gave us no real reason to alter our outlook. Further, pre-argument hype about the challengers’ standing to bring suit was deflated when the government effectively conceded the point during oral argument. It appears that the case will not go away so quietly.
Where does that leave us?  The perennial question marks: Chief Justice John Roberts and Justice Anothony Kennedy. 

Kennedy Clues

Justice Kennedy’s questions during oral argument sent mixed signals. On one hand he expressed concern about federalism implications and “death spirals” in states’ insurance markets under the challengers’ reading of the law. He questioned whether the Hobson’s choice confronting the federal-exchange states (i.e., establish a state-run exchange or else) amounts to unconstitutional coercion particularly given the extensive discussion related to how onerous it is to set up an exchange, and whether the statute should be read to avoid such an outcome.

On the other hand, Justice Kennedy signaled pretty clearly the weakness in the government’s case is the text of the act. In fact, when the Solicitor General Donald Verrilli embarked on his textual argument, Justice Kennedy interrupted and told him he was headed in the “wrong direction” for his case. Justice Kennedy also expressed skepticism about deferring to the IRS’s interpretation of the Act to resolve this dispute. With billions of federal dollars at stake, he noted, the IRS should have a “very, very clear” idea of what Congress intended.

Roberts Clues

Basically, there were none. The Chief Justice, usually an active participant in oral argument, stayed mostly silent. The few questions he did ask may indicate he’s (again) looking for a creative way to preserve the status quo and throw the issue back to the other branches of government.

Justice Kennedy was not the only Justice who mentioned federalism concerns and potentially unconstitutional coercion of the states.  Justices Sonia Sotomayor, Elena Kagan and Samuel Alito also questioned the lawyers on this point. Federalism could very well become a rallying point for a majority opinion, and the challengers missed a clear opportunity during oral argument to take the issue off the table by failing to argue how easy it is to establish a partnership exchange that the federal government would continue to operate.

If the dividing line between the majority and the dissenters in this case turns out to be the “textualists” on one side and those who are concerned with death-spiral-type implications on the other, the challengers missed a critical opportunity to make it an easier choice for the justices, particularly Justice Kennedy, to vote their way.

What’s Next

If the government wins, the status quo reigns. Republicans plan to do something in the short-term to assist individuals if there is any loss of federal subsidies. But the big questions remain:  What can Republican leadership and the base agree to do? And what will President Obama sign (if anything)? Come June, however, the challengers’ choice of hog over pig should render these questions moot.

Scott Sinder Chief Legal Officer, The Council; Partner, Steptoe Read More

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