King v. Burwell explained

King v. Burwell

Obamacare is back at the Supreme Court, this case was launched 5th March 2015.

Why is the case important?

The case has got the potential to roll back a significant portion of Obamacare - the subsidies which around 7 million middle-income people across more than 30 states now receive in order to purchase health insurance. If these subsidies are removed people will no longer be able to afford health insurance as they will lose their tax credits. Getting rid of those people from the insurance market means prices rising for everyone else.


Obamacare subsidies explained.

What is the case about?

In a nutshell, Obamacare sets up marketplaces in every state where individuals who do not have health insurance can shop for individual health plans. The majority of Democrat states have set up their own marketplaces (known as exchanges) while the majority of Republican states did not, instead allowing the federal government to do that. In total, about 85% of customers qualify for federal subsidies to pay for for coverage (all based on their income).

However, the problem is that section 1401 of the Affordable Care Act (Obamacare) says that subsidies should flow to customers "through an Exchange established by the state." And so, the plaintiffs have used this to bring the case forward, arguing that it is only people in state-run market places (not those in federal run marketplaces) that can obtain subsidies.

How is the Supreme Court likely to rule?

Simply put it, the very fact that the court agreed to hear the case in the first place suggests that at least four justices are seriously considering rolling back those subsidies. Experts have argued that all four justices who were appointed by a Democratic president will rule in favour of government. With regards to the Republicans, however, experts are indecisive whether the Republican justices will join the Democrats and preserve the subsidies.

Chief Justice John Roberts, for instance, sided in 2012 with the Democrats and ruled that Obamacare was constitutional. He and Justice Anthony Kennedy are most likely to side with the Democrats again this time.

FantasySCOTUS is an online prediction market whereby legal experts attempt to predict the outcome of court cases, thus far, legal experts are predicting a victory for the government.

+Visit this site for an interactive map of how many Americans will lose subsidies.

What are the two arguments?

Plaintiffs: clear language of that one section of the law means that only residents of state-run exchanges are allowed to receive subsidies.

Obama administration: Congress had intended that that phrase would refer to both state and federally run marketplaces. There is a long history of court rulings that, if Congress says something confusing, then interpreting the law falls into the hands of the regulators and not the courts.

What will happen if the plaintiffs win?

“We know of no administrative actions that could, and therefore we have no plans that would, undo the massive damage to our health care system that would be caused by an adverse decision,”

-Slyvia Matthews Burwell, U.S Secretary of Health 

Basically, there's no contingency planning, the administration is screwed. But, the administration will most likely do everything in their power to ensure that states who have not yet established their own exchanges will do so as soon as possible.

Why may some Republicans want to help save subsidies?

Republican politicians may be sensitive to this situation in which millions of their constituents are likely to lose their health insurance coverage. It's likely insurers, fearing a breakdown in the market place, will lobby for a fix. Obamacare opponents have suggested that the resulting crisis may result in opportunity for negotiation with the White House. Read it here.

How have the states reacted?

11 of the states at risk of losing subsidies have have gone so far as to ask the Supreme Court to preserve their subsidies. Three states: Nevada, New Mexico and Oregon planned to run their own exchanges but switched to the federal system after their computers crashed. They could try fixing the computer systems to keep their subsidies. Florida and Texas have shown little enthusiasm. While 7 seven other states like North Carolina and Missouri have passed state laws preventing the governors from pursuing exchange-building activities.

Who brought the case forward?

Several other cases with similar circumstances have also been brought forward but this one is the only one taken to the Supreme Court. David King, Douglas Hurst, Brenda Levy and Rose Luck are suing the federal governments offer to subsidies them. The case is funded by a thinktank called Competitive Enterprise Institute.

When will the case be decided?

Some time in June this year.