- Millions of Americans will lose health insurance subsidies immediately if the Supreme Court rules against Obamacare this spring, Health and Human Services Secretary Sylvia Burwell wrote in a letter to Congress Tuesday.
- Burwell says that the agency has found no administrative fix that could re-instate the financial help
- The pending court case, King v. Burwell, argues that the federal government does not have legal authority to provide health insurance subsidies to Healthcare.gov customers
"We have no plans to undo the massive damage"
Legislators have long pressed Health and Human Service Secretary Sylvia Burwell to explain what, if anything, the White House could do if the Supreme Court finds Healthcare.gov's subsidies to be illegal.
On Tuesday, Burwell provided an answer: pretty much nothing. If the Supreme Court rules against Obamacare, Americans who receive tax credits from Healthcare.gov will have their financial support ended.
"We know of no administrative actions that could therefore have no plans that would, undo the massive damage to our health care system that would be caused by an adverse decision," Burwell wrote in a Feb. 24 letter to Congress.
What Health and Human Services is essentially saying here is that, if they lose in court, their hands are tied. There are two other possibly remedies: Congress could pass new legislation to fix the law, or states could establish their own exchanges. But the executive branch says it could not continue doling out subsidies barring those scenarios playing out.
What's the case about?
According to the challengers, the plain text of the Affordable Care Act limits the federal subsidies to states that actively established their own insurance exchanges. In Obamacare's first year, only 14 states and the District of Columbia did that; the other 36 defaulted to federally-operated exchanges run through HealthCare.gov.
The related case, Halbig v. Burwell, garnered considerable attention over the summer. In Halbig, a three-judge panel from the DC Circuit Court ruled to strike the contested subsidies. However, that decision is being appealed the decision en banc, meaning that the ruling has been vacated and a larger panel of active DC Circuit judges will reconsider the case on its merits in December. The en banc decision is expected to uphold the subsidies.
King v. Burwell challenges Obamacare subsidies in 36 states
In Obamacare's first year, 36 states defaulted to Healthcare.gov, the federally-coordinated exchange. An estimated 87 percent of individuals who enrolled through the website are receiving subsidies — the precise subsidies that this court case calls into question.
Without subsidies, private insurance become unaffordable for many people who have already enrolled. The judicial process is still playing out, but according to recent analysis from the Robert Wood Johnson Foundation, this decision could affect over 7.3 million people expected to receive federal subsidies in 2016.
If the plaintiffs prevail and subsidies are withdrawn, healthy people would drop their coverage, and only the people who are very sick — and therefore very expensive to insure — would keep their plans.
This sets up the classic insurance "death spiral". By putting coverage out of financial reach for so many people, it would undermine the entire purpose of the Affordable Care Act.
Challengers say that the subsidies on Healthcare.gov are illegal
The Affordable Care Act provided for the creation of different types of insurance exchanges. Fourteen states and DC established "state-based" exchanges, which give them more flexibility and authority in controlling their Obamacare markets.
In the event that a state chose not to establish its own exchange, the Affordable Care Act dictates that the federal government would step in and create a "federally-facilitated" exchange. There's also a middle ground for partnership exchanges, where states and feds share authority. Healthcare.gov is the face of federally-facilitated and partnership exchanges.
These different types of exchanges were set up by different parts of the health law. But the part of the Affordable Care Act that calculates the subsidies specifies that those subsidies are available to people "enrolled in through an Exchange established by the State under 1311" — the section that sets up state-basedexchanges. It does not reference section 1321, which sets up the federal and partnership marketplaces.
Because it's written that way, the plaintiffs argue that subsidies are only available in the 14 states that established their own exchanges.
The Supreme Court will hear oral arguments in the case on March 4.