ACA Ok? Once again, Chief Justice Roberts seems to dismiss an argument from intent

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In his June 2015 decision disposing of King v. Burwell, the last lawsuit before the presenting pending one seeking to cripple the Affordable Care Act, Chief Justice Roberts summarily disposed of the plaintiffs' patently fraudulent argument about Congressional intent. 

The suit was based on a drafting error. While the law envisioned states forming their own health insurance exchanges, but gave them the option of deferring to a federal exchange, key provisions referred only to "an exchange established by a state" as the vehicle for allocating premium subsidies to enrollees. The error was a biproduct of the political warfare that affected the ACA's drafting history, preventing an ordinary reconciliation of Senate and House versions.

Recognizing that spotlighting a drafting error would not suffice to convince the courts to cripple the ACA marketplace, the plaintiffs argued that the omission was no error. They claimed that while Congress intended to authorize state-based health insurance exchanges to grant premium subsidies to qualifying enrollees, Congress intended not to authorize the federal exchange to grant those subsidies. (At the time the suit came before the Supreme Court, 37 states were relying on the federal exchange, HealthCare.gov.) Testimony by those involved in the law's creation was unanimous that no one intended to bar the federal exchange from awarding premium subsidies.

Writing for a 6-3 majority, Roberts' disposed of the intent question thusly:

Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. 

The invisible primary for judicial repeal of the ACA

Slapped on a Friday evening with a hyperpartisan judge's palpably ridiculous decision purporting to strike down the entire ACA, I suspect that many progressive minds restarted a two-stroke motor that's been running since Texas v. U.S. first stained the horizon.

Stroke 1: this suit is too ridiculous even for Republican judges.  It claims in effect that Republicans in Congress repealed the entire ACA in a fit of absent-mindedness when they zeroed out the mandate penalty last December.

Stroke 2: we had the same reaction to the two prior anti-ACA suits to reach the Supreme Court, one of which failed by a 5-4 and the other by a 6-3 count. Will the absurd again become Republican orthodoxy?

Will this legal nightmare recur? Jack Balkin offers crucial perspective:

My call on King

I hope I don't end up thrashing myself for wishful thinking, but I think the Supreme Court will rule for the government in King -- no odds on whether it's Chevron deference (the law is ambiguous, and the IRS interpretation is reasonable) or that the law's intent to provide subsidies to all states is unambiguous. I would hope that my bias -- I think the case is a fraud -- is balanced by superstition --an unwillingness to predict what I wish (overridden by being asked, as part of a list).

I can't wrap my mind around both Roberts and Kennedy agreeing to a) blow up the economy and b) credit the plaintiffs' bogus narrative that Congress intended a form of coercion that no one recognized and that the law does not spell out (a state only gets premium subsidies if it establishes its own exchange).  On both counts I take some reassurance from the dissent as well as the majority opinion in NFIB v. Sebelius, the challenge to the ACA's constitutionality ruled on in 2012.

The dissent in that case shows both thorough awareness of the interdependence of the ACA's core provisions and a wariness of causing massive economic disruption:

Victims of an ACA subsidy cutoff may live mainly in Republican districts -- but will they vote?

At Jonathan Cohn's request, Families USA calculated that two thirds of those who stand to lose their health insurance subsidies if the Supreme Court rules for the plaintiffs in King live in Republican Congressional districts (4.2 million subsidized buyers on healthcare.gov live in Republican districts, vs. 2.1 million in Democratic districts).

Those numbers appear to support the hypothesis that a Supreme Court decision cutting off subsidies to those who obtained their insurance on insurance on the federal exchange, healthcare.gov, may politically damage Republicans, who supported the King plaintiffs' claim that the ACA authorized subsidies to flow only through exchanges "established by a state."  But even if Republican attempts to blame the cutoff on Democrats' poor legislating fail utterly, the demographic profile of those who bought subsidized plans on healthcare.gov may moderate the political fallout somewhat.

John Barrasso's tell: King is a fraud

In his determination to accent the negative in characterizing the ACA, Senator John Barrasso has exposed the absurdity -- in fact the fraud -- at the heart of the King v. Burwell suit.

Here's how Barrasso characterizes the IRS rule allowing subsidies to flow through the federal exchange:

“Instead of bullying the Supreme Court, the president should spend his time preparing for the reality that the court may soon rule against his decision to illegally issue tax penalties and subsidies on Americans in two-thirds of the country,” he said in a statement. “Congress will not pass a so-called ‘one-sentence’ fake fix.”

The fix is "fake" because, according to this party line, Congress never intended for the federal exchange to be empowered to credit subsidies. But Barrasso leads with "penalties" because it's more fun to emphasize the stick than than the carrot. The individual mandate is the flip side of the subsidies: without subsidies, the vast majority of the uninsured would be exempt because coverage would not be affordable.

Republican conundrum: Can the federal government subsidize private health insurance without regulating it?

Two moderate conservatives, neither of them averse to a federal effort to make health insurance affordable for all Americans, walk into a conference session and disagree about likely Republican behavior should the Supreme Court rule for the plaintiffs in King v. Burwell, thus cutting off subsidies for some eight million Americans who bought their health plans on healthcare.gov.

This happened earlier this month at the Health Insurance Exchange Summit in Washington, D.C. The disagreement was between Stuart Butler, a longtime Heritage Foundation scholar now at the Brookings Institute, and Christopher Condeluci, who was tax and benefits counsel to the Senate Finance Committee while the ACA was being drafted.

Butler, generally considered the father of the individual mandate (though he has renounced his brainchild and its bastard stepchild, the ACA), kicked off the session by sketching out a post-King settlement that he hoped might lead to a "kumbaya moment" and win 400 votes in the House.  That settlement would build on the ACA's existing "innovation waivers," provided in Section 1332, which empower states to propose alternative schemes that meet the ACA's coverage and affordability goals by different means.

Section 1332 puts everything up for grabs -- the individual and employer mandates, health plan coverage rules, exchange structure, and subsidy allocations. Since alternative schemes must meet ACA standards for coverage and affordability, however, Republicans complain that Section 1332 takes away with the left hand the freedom it proffers with the right. Butler proposed that in a post-King negotiation Republicans and Democrats might negotiate a "superwaiver" process that would loosen the ACA standards and lighten HHS oversight while also moving up the timeline -- at present, approved state proposals can't take effect until 2017.

Condeluci, who has said that Republicans on the Senate Finance Committee had signed off on 80% of the bill that eventually became the ACA, agreed that Republicans post-King would look to "1332-like" alterations to the ACA. But he said that Republicans would not accept the waiver structure as a framework. Instead they would invite states to opt into a Republican alternative that would include repeal of the individual and employer mandates as well as of the essential health benefits that every plan qualified under the ACA must provide.

Afterward, I asked Condeluci whether the plan he envisioned would give states free reign to take federal subsidy money and reorder their insurance markets as they saw fit, or rather to opt into a prepackaged Republican scheme that would lay out new coverage rules. He said, in effect, either/or. His answer spotlights an important...let's call it tension in Republican thinking about healthcare reform.

Post-King fallout: Waiting for Superwaiver?

I have a post up at healthinsurance.org that recounts opposing forecasts from two moderate conservatives about likely Republican behavior if the Supreme Court rules for the plaintiffs in King v. Burwell.  invalidating subsidies credited through healthcare.gov.

First up is Stuart Butler, generally considered the father of the individual mandate, long at Heritage, now at Brookings. The other is Christopher Condeluci, a former Republican Senate Finance Committee staffer who was involved in that committee's efforts to report out a bill with bipartisan backing (he has said that there was agreement between Republicans and Democrats on the committee on about 80% of the substance of what became the ACA).

The two were on a panel on likely post-King fallout at the Health Insurance Exchange Summit in D.C. last week. Here's the upshot of their disagreement:

Stuart Butler.. suggested that Democrats who wanted to preserve the ACA's core framework and Republicans looking to alter it might find "Houdini-like" escape from their impasse by taking inspiration from the ACA's "innovation waivers." These waivers empower states to propose alternative schemes that meet the ACA's coverage and affordability goals by different means...Butler spoke hopefully of a "superwaiver process" that would speed up the timeline and ease the application process,  giving states more freedom to shape their health insurance markets with less oversight from the federal government.

A modest post-King proposal

Political science blogger Jonathan Bernstein is one King v. Burwell watcher who does not discount the likelihood that Republicans in Congress will come under intense pressure to keep the subsidies flowing through healthcare.gov if the Supreme Court rules for the plaintiffs, Knowing this, I was nonetheless a bit surprised to read this morning that he thinks a more or less unconditional Republican surrender is a real possibility.

Imagine, Bernstein writes, that Republicans write a bill restoring the subsidies along with a poison pill like repeal of the individual mandate, and Obama vetoes it. What then? With most GOP senators and House reps wishing the "opportunity" to throw 8 or 9 million people off their insurance plans to go away, the party could swing either way:

We've seen similar cases in the last Congress: Republicans eventually decided to allow Superstorm Sandy relief and the Violence Against Women Act to pass, while they never permitted votes on a comprehensive immigration plan or on a bill prohibiting employer discrimination based on sexual orientation or identity. In each case, most Republicans wanted to oppose the measure in the event of a vote, though there were enough votes to pass it anyway. The question was whether enough Republicans wanted the legislation to pass while publicly voting "no." And they probably didn't know what they would do until the situation played out.

And here's his call;

My guess is that if this does happen (the court may, and should, rule the administration has read the health-care law properly), Republicans would be under heavy pressure to allow a simple fix to pass, and would probably give in. But it's hardly certain.

I think there's a third possibility: with both sides under heavy pressure and public opinion as to who's to blame hanging in the balance, Republicans might settle for amending the ACA in a conservative direction without destroying it. (See Michael Leavitt, Bush Jr.'s HHS Secretary, on this.) But how much amendment would be enough to satisfy the wrath of the party's base?

Here's one possibility: detoxify Bernstein's poison pill a bit. Give each state the option of repealing the individual mandate.

"Obamacare, Obamacare! stay a little. Ha!*

As Greg Sargent never tires of reminding us, Republicans have been promising an ACA replacement plan for 50 months now and haven't been able to deliver. Ergo, Sargent asserts, claims by Republican legislators that they are developing a plan to replace the ACA and keep premium subsidies flowing should the Supreme Court rule for the plaintiffs in King are a ruse, designed to convince swing justices that chaos won't erupt if the court invalidates subsidies credited through the federal exchange.

That is probably at least partially true, as Republicans have long proven themselves unable to unite behind a plan that would replace a large portion of ACA benefits while creating different winners and losers. But there are plans and plans (and motives and motives), and elected officials don't yank away existing benefits lightly. While Republicans may well be paralyzed by a Supreme Court decision that gives them what they say they want, there are elements in the plans they're floating that could find their way, sooner or later, into a post-King settlement.  Republicans' lack of unity could lead them to punt, perhaps declaring victory with relatively modest gains while restoring most of the status quo.

Most interesting in this regard are Republican proposals to freeze or patch the the current system while they devise a fix. Here's how one very sympathetically worded account describes such a measure:

Minnesota's "public option"

Ever since I read in fall 2013 that ACA bronze plan deductibles average over $5,000 per person, I have been concerned about the availability of such essentially catastrophic coverage at tempting low premium prices to low income ACA buyers -- who we now know are the vast majority of ACA private plan buyers (83% of buyers on healthcare.gov have household incomes under 250% of the Federal Poverty Level).

Hence my preoccupation with Cost Sharing Reduction subsidies, available only with silver-level plans, which reduce out-of-pocket costs to less prohibitive levels.  A silver plan has an actuarial value of 94% for buyers under 150% FPL and 87% for those at 200-250% FPL. But silver plans are expensive for low income people. The benchmark second-cheapest silver plan costs 4% of income for buyers with incomes in the  138-150% FPL range and about  6% for buyers with incomes at 150-200% FPL. That's a lot --  $118 per month for a single person earning $23,000. And  a plan at that price may still carry a per-person deductible as high as $1,500 for those in the 150-200% FPL range.

The ACA allows for a more truly affordable option, but only one state has taken it -- in fact, has long had it. That's Minnesota, which since 1992 has had a program similar to Medicaid, MinnesotaCare, serving residents with incomes up to 200% FPL.  As of Jan. 1, 2015, MinnesotaCare was approved as a Basic Health Plan (BHP) under the ACA -- that is, a state-run plan serving residents with incomes between 138%  and 200% FPL (those below 138% qualify for Medicaid, known in Minnesota as Medical Assistance). Under ACA rules, the federal government pays 95 percent of the ACA subsidies to which enrollees in the plan would have been entitled if they enrolled in private QHPs.

Nicholas Bagley parses the oral arguments in King v. Burwell

Over at healthinsurance.org, I have an interview up with Nicholas Bagley, post-morteming today's oral arguments in King v. Burwell, the lawsuit aiming to gut the ACA exchanges. Bagley,  a former appellate attorney at DOJ and currentl health law professor at the University of Michigan, is co-author of two amicus briefs in support of the government in King, both addressing issues that Anthony Kennedy probed in some depth in today's hearing.

Kennedy lifted the spirits of ACA supporters early on by questioning whether the plaintiffs' claim that the law aimed to essentially force states to form their own health exchanges by not authorizing premium subsidies to be credited through the backup exchange would render the law unconstitutionally coercive.That was the upshot of one Bagley brief. But he then turned around and suggested that the law might be, in effect, both unambiguous (in denying credits through the federal exchange) and (potentially) unconstitutional.

Much later, Kennedy explored a more obscure point. While the Supreme Court generally holds that if a law is ambiguous, the courts should defer to the interpretation of the agency charged with implementing it, that might not be the case here:

Well, Ezra Klein, Republicans may not have "plan" to save insurance markets after King. But they may deal

Republican Senators Orrin Hatch Lamar Alexander John Barrasso are out today with a lightly sketched "plan" to salvage premium subsidies credited through the ACA's federal exchange if the Supreme Court rules for the plaintiffs in King v. Burwell.  The proposal closely resembles the  possible post-King negotiation that former HHS Secretary Michael Leavitt outlined to me. Here's Hatch et al:

First and most important: We would provide financial assistance to help Americans keep the coverage they picked for a transitional period. It would be unfair to allow families to lose their coverage, particularly in the middle of the year....

Second, we will give states the freedom and flexibility to create better, more competitive health insurance markets offering more options and different choices. Republicans understand that what works in Utah is different from what works in Tennessee or Wyoming. We want to give states the time and flexibility to design health-care systems that work for them, not for the bureaucrats in Washington.

People who live in states that have state exchanges will continue to be subject to Obamacare’s costly mandates and rules, along with the subsidies. But their states could also have the benefit of our solution. Every state would have the ability to create better markets suited to the needs of their citizens.

And here's Leavitt last week:

Republican can do what they will to American healthcare -- by accepting the Affordable Care Act

Ask Republicans how they will reform the health insurance market if they succeed in repealing the Affordable Care Act and you will not get a substantive "replace" plan. You will, however, hear three desiderata: 1) give states more control of their insurance markets; 2) give insurers more freedom to design plans outside ACA-imposed constraints; and 3) give consumers in the individual insurance market more choice (though the ACA marketplace shelves in most regions at present are not what you would call bare).

If Republicans were sincere about changing the market in this direction, they would have enormous leverage to do so, both by working within the ACA's essentially federalist (or "state-deferential") structure and by negotiating changes to the law that Democrats would surely accept in exchange for an end to dead-end opposition.

Let's count the ways that Republicans in state government and Congress could shape the health insurance markets to their liking, starting with the tamest and moving toward the most aggressive.

Michael Leavitt envisions a post-King negotiation to amend the ACA

If the Supreme Court upholds the plaintiffs in King v. Burwell and thus cripples the ACA exchanges in three quarters of the states, what then? Neither side is talking about how they might compromise to avoid de-insuring 7 million Americans and crippling the insurance market. But Michael Leavitt -- former HHS Secretary under George W. Bush, former 3-term governor of Utah, current CEO of an eponymous healthcare consultancy -- goes there, in an interview with me, now up on healthinsurance.org. Here's the core of what he envisions:

[A] possibility would be to take the current subsidy structure, but allow people who qualify for a subsidy to get it not just in a state exchange but in a private exchange that may be authorized by the state. Multiple private exchanges might begin to pop up. You’d end up with  a competitive marketplace with many more exchanges and lots more innovation.

I hope you'll read the whole thing.  And then, perhaps, a prior interview I conducted with Leavitt last June about the scope for state innovation in healthcare that the ACA does provide. And while you're at it, a  January 2014 Leavitt interview with Julie Appleby of KHN in which he expressed considerable empathy for the HHS officials trying to get the ACA implemented.

P.S. My own take on conservative demands for less regulation and more "innovation" in health insurance, probably inspired in part by this interview (though more immediately by Ross Douthat's column on conservative policy proposals), is in the prior post.

The case against King, by Scalia, Kennedy et al

The plaintiffs in King v. Burwell claim that the ACA's creators intended to coerce states into setting up their own exchanges by authorizing state-established exchanges alone to credit subsidies to buyers -- denying that power to the backup federal exchange.

In response to this manifestly absurd assertion of intent, the law's supporters have pointed out that no one involved in the law's design, passage or implementation understood such coercion to exist; that laws that make federal grants to the states conditional on specific state action invariably spell out the consequences of non-participation; that the ACA's clear intent is to provide near-universal coverage; and that the ACA's core provisions were designed to be interdependent, so that denying subsidies to residents of some states would render the law inoperable.

On  all of these points, no participant has been so eloquent as the four dissenting Supreme Court justices in NFIB v. Sebelius, the suit challenging the law's constitutionality, who asserted that the entire law should be struck down.

In their dissent, Justices Scalia, Kennedy, Thomas and Alito argued repeatedly that to strike down any core provision -- e.g., the individual mandate or the Medicaid expansion -- was to thwart the intent of the law's creators and render the remaining parts of the law unworkable -- hence the imperative to strike down the whole law.

Abbe Gluck has highlighted the dissenters' most direct assertions of interdependence of parts, laying particular stress on their observation that the law's "system of incentives collapses if the federal subsidies are invalidated" because without the subsidies, "the exchanges would not operate as Congress intended and may not operate at all" (dissent, p. 60).

Equally striking is the dissenters' argument that making the Medicaid expansion fully voluntary, as the Court majority did, would also thwart Congress's manifest intent to provide universal coverage and would thus render the entire scheme unworkable.

The real world case against King: Should the Supreme Court impose "risks and uncertainties" on U.S. economy?

Leave aside for a moment the frankly ridiculous question of whether the text of the ACA authorizes premium subsidies to flow through the federal exchange. .Timothy Jost, surveying 30 amicus briefs filed to support the IRS' reading of the law to that effect, first covers those primarily engaging with the text of the law then turns to those from stakeholders that detail the real-world effects of gutting the ACA.

A note before looking at Jost's powerful survey of these pleadings. Some would argue that these real world effects are immaterial: either the law authorizes subsidies to be credited through Healthcare.gov or it doesn't. As I noted once before, though, the conservative justices who dissented against  the 2012 decision that upheld the constitutionality of the ACA  demonstrated their sensitivity to the real world effects of Supreme Court decisions in that very dissent.

Justices Scalia, Kennedy,Thomas and Alito argued that since the individual mandate was unconstitutional the whole law must be struck down because all its key provisions were interdependent and many of them would wreak economic havoc if left to operate with a core provision removed.  They were quite specific about the potential consequences of disfguring the law without killing it:

The ACA provision that should kill King, updated

[Update, 1/23: The ACA provision discussed below, which directs the federal as well as state exchanges to report to the Treasury tax credits provided to ACA private plan buyers, is treated in full in the government's respondents' brief against the King plaintiffs. The relevant paragraphs from the brief are posted at bottom.]
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July 29 - Ever since a three-judge panel of the D.C. Circuit Court found in Halbig v. Burwell that the ACA only authorizes subsidies to be paid for health insurance bought in state-run exchanges, not in state exchanges set up by the federal government, progressive reporters have been ransacking the record to  prove what they always knew: that the law's creators never intended to exclude federally run exchanges from the subsidy regime.  Today, Greg Sargent and Jonathan Cohn both published compelling circumstantial evidence to that effect.

It seems to me, though, that such circumstantial evidence should be unnecessary. The ACA includes a provision that ought to settle the issue -- on that the majority in Halbig egregiously misread. Health law scholar Timothy Jost highlighted the dispositive provision back in September 2011, two months after the IRS issued a rule spelling out that subsidies would be available through the federal exchange (at which point the brains behind the Halbig suit, Michael Cannon and Jonathan Adler, immediately began arguing in print that the IRS rule contradicted the ACA's text). With reference to the drafting error stipulating only that subsidies be credited through an exchange "established by a state," Jost asserted:

 we do not need to rely on the courts to correct this error. Congress corrected it itself.

Four days after Congress passed the Patient Protection and Affordable Care Act, it enacted the Health Care and Education Reconciliation Act of 2010. Section 1004 of HCERA amended section 36B(f) of the IRC to impose on exchanges established under section 1311(f)(3)—that is, state exchanges—and under section 1321(c)—that is federal exchanges, the obligation to report to the IRS and to the taxpayer information regarding tax credits provided to individuals through the exchange. In this later-adopted legislation amending the earlier-adopted ACA, Congress demonstrated its understanding that federal exchanges would administer premium tax credits.

In a subsequent post, Jost noted, "As a later-adopted statute, HCERA would take precedence over PPACA if there were a contradiction."

If King is upheld, what will Congress do?

Congressional Republicans, who have promised and failed to come up with a legislative alternative to the Affordable Care Act for five years, are now promising that they will have a replacement ready in case the Supreme Court upholds the plaintiffs  this June in King v. Burwell.  Here's Reuters:

Representative Tom Price, Republican chairman of the House Budget Committee, told a conservative forum that the high court's anticipated ruling in the case known as King v. Burwell could cause President Barack Obama's signature domestic policy to unravel quickly.

"We need to be ready, willing and able to move forward," said Price, a leading Obamacare critic who replaced Wisconsin Republican Paul Ryan as House Budget Committee chairman earlier this year.

“We believe we are going to get to that point. I believe the president is actually going to be open to a better way,” he added.

A ruling for the plaintiff in King would leave the body of the law intact, albeit in a vegetative state. The exchanges would still exist, though they would be completely dysfunctional in the states covered by Healthcare.gov. Governors and legislatures in those states would be responsible either for finding a way to continue to subsidize the premiums of tens or hundreds of thousands of state residents who have accessed coverage through Healthcare.gov, or for justifying the denial of subsidies to those residents.

Because the law would still be on the books, there is nothing to force the administration to negotiate a full "replacement" that would entail repeal (as in "repeal and replace"). That leaves the question: Are there possible amendments that would meet Republicans' alleged policy goals without shredding the ACA's coverage grant?  Under pressure of abruptly withdrawing coverage from 8 million Americans, is compromise conceivable?