A Primer on the Case for the Future of Choice in Health Care

By Benita M. Dodd



Not many Americans are aware that March 4 heralds a turning point in the Affordable Care Act. It’s when the U.S. Supreme Court hears oral arguments over whether ObamaCare goes forward under the rule of law or under arbitrary interpretation by overreaching politicians and bureaucrats.

King v. Burwell is one of four lawsuits, along with Halbig v. Burwell, Pruitt v. Burwell and Indiana v. IRS, to argue that the law specifies subsidies (tax credits) only for enrollees of state-run exchanges. And if that is the case, then extending subsidies through federal exchanges is illegal because it exceeds the authority that Congress gave the Internal Revenue Service.

It’s important to note that the parties that oppose the subsidies are not opposing the Affordable Care Act. They are asking the court to ensure that the ACA is enforced – to the letter.

Here’s is what matters to the case in the law:

  • Section 1311 defines a health insurance exchange as a “governmental agency or nonprofit entity that is established by a state.”
  • Section 1321 allows the federal government to set up federal exchanges in states that do not establish one.
  • Section 1401 allows the IRS to issue “tax credits” for exchange enrollees with household income between 100-400 percent of the poverty level, who are not eligible for qualified employer coverage or other government programs, and “enrolled … through an Exchange established by the State under 1311.” (That is household income of $11,670-$46,680 for an individual and $23,850-$95,400 for a family of four.)

The distinction is critical for the 37 states, including Georgia, that chose not to operate state exchanges. If the Supreme Court vacates the IRS rule allowing the subsidies, 4 million Americans will find their insurance no longer qualifies as “affordable,” meaning they will no longer be forced to pay for it or pay fines.

Cato Institute’s Michael Cannon and Jonathan Adler of Case Western Reserve University are noted national experts on the massive law, on the specific provisions and the related regulations. They have cited numerous exchanges including by ACA architect Jonathan Gruber, confirming the federal government’s intent before it reconsidered its intent. It was a carrot-and-stick approach to the states: If you establish your own state exchange, your enrollees will get subsidies.

Not everybody is hoping the IRS and Obama administration lose. In January, the American Hospital Association, joined by the Federation of American Hospitals, Association of American Medical Colleges and America’s Essential Hospitals, filed a friend-of-the-court brief in the case. Ruling for the plaintiffs, “would be a disaster for millions of lower- and middle-income Americans,” the groups argue. Other groups, including the American Cancer Society, America’s Health Insurance Plans, the American Academy of Pediatrics, the Catholic Health Association and former high-ranking government officials argue that ending subsidies would hurt patients and providers.

David King (of King v. Burwell) and three other Virginia residents, “who do not want to purchase comprehensive health insurance” are plaintiffs; Health and Human Services Secretary Sylvia Mathews Burwell is the defendant. Virginia is served by the federal exchange, healthcare.gov. According to the case:

Without the premium tax credits, the plaintiffs would be exempt from the individual mandate under the unaffordability exemption. With the credits, however, the reduced costs of the policies available to the plaintiffs subject them to the minimum coverage penalty. According to the plaintiffs, then, as a result of the IRS Rule, they will incur some financial cost because they will be forced either to purchase insurance or pay the individual mandate penalty.

Resisting the administration’s mandates is not about depriving Americans of health care. It’s about giving Americans the freedom to choose the best health plan for themselves and their families without government forcing them to enroll in health coverage or pay a tax penalty. It’s about making health care affordable, transparent and accessible. Massive increases in premiums and high deductibles, cancelled plans and changing physicians are hurting patients and taxpayers’ wallets. Still 30 million are uninsured; fraud, waste, abuse and uncertainty discourage physicians.

Cannon points out, “How much disruption the IRS rule ultimately causes depends on how Congress responds to its being struck down. Congress could simply ratify the IRS’s revision of the statute by authorizing subsidies in federal exchanges. Or it could move in the opposite direction, and make private insurance more affordable for millions, particularly low-income Americans, by actually reducing its cost.”

The Supreme Court’s decision in the case, King v. Burwell, is expected in June; its biggest cases are typically announced at the end of the term. If Congress believes the subsidies should be expanded, let Congress vote to do so. Such federal overreach and legislation by regulation harm states and their citizens.

Benita Dodd is vice president of the Georgia Public Policy Foundation.