The Wellness Times

King v. Burwell, Explained

You might have heard about the latest Supreme Court challenge to the Affordable Care Act (ACA), King v. Burwell. Any Supreme Court case can get pretty complicated, so we’re going to try to break it down and simplify it for you since its outcome could drastically effect health insurance for Ohioans.

So what’s the real issue?

Part of the ACA involves offering subsidies to people buying insurance through the exchange as long as their income is below 400% of the federal poverty level. This helps the plans actually become affordable for the average US citizen. Congress gave each state a choice to either set up its own exchange (13 did) or let the federal government run its exchange through the federal Marketplace (the choice of 37 states, including Ohio). At the end of Open Enrollment in 2015, 8,838,291 plans had been selected on the federal exchange (234,507 in Ohio). Some are arguing that the exact language of the ACA is being incorrectly interpreted, questioning whether the ACA allows for subsidies only for state-run exchanges. If it does, over 7.5 million Americans (196,846 Ohioans) could lose their subsidies and have to pay the entire premium for these health insurance plans. The average subsidy for an individual living in Ohio is $247 per month.

Who are the plaintiffs?

There are technically four plaintiffs in this case, David King, Doug Hurst, Rose Luck, and Brenda Levy. These four individuals have pretty different backgrounds. We’ll talk more about them in a bit.

Who are the defendants?

This one’s a little bit simpler! Burwell is Sylvia Matthews Burwell, the United States Secretary of Health and Human Services. The plaintiffs are essentially suing the US government.

Why are the plaintiffs suing?

The plaintiffs are suing the U.S. government because they state that if they do not receive subsidies they would qualify for the hardship exemption and not have to purchase health insurance. With the subsidies, if they did not purchase health insurance they would receive a tax penalty.

Under the federal laws, if the cost of insurance coverage is over 8% of someone’s income, that person would qualify for a hardship exemption to the individual mandate penalty (the fine/tax for not purchasing insurance).  The plaintiffs state that they have incomes that are low enough that they would qualify for the hardship exemption, however, the subsidies reduced the cost of their coverage to below 8% of their income.  The existence of the subsidies causes them be eligible for the hardship exemption and would now have to either purchase health insurance or pay the penalty for not buying insurance.

So you can say the “harm” they show is that the IRS rule results in them having to pay a penalty they would otherwise be exempt from paying.

Do the plaintiffs have standing?

There’s been a lot of talk asking if the plaintiffs actually have standing. That means that a person can demonstrate significant harm from a law or action. When there are multiple plaintiffs, you only need one to have legal standing for the case to continue.

It looks like one or two out of four plaintiffs have standing. Brenda Levy and David King, under the ACA, would be exempt from having to purchase insurance because the premium of the cheapest plan would have been more than 8% of their household income. Rose Luck’s standing is a bit trickier. She listed a motel as her address. Since premiums are determined by where you live, this would effect if she was actually harmed by the legislation. Using that address, the cheapest plan for her would be almost 9% of her income, also exempting her. It all seems to lay on the shoulders of Doug Hurst. It was initially questioned whether, as a Vietnam War veteran, Hurst was eligible for free care through the VA, making him ineligible from purchasing insurance on the Marketplace. But since he only served for 10 months he was ineligible for VA care and forced to buy health insurance on the Marketplace. If he did not, he would receive a tax penalty.

What are some arguments in favor of the plaintiff?

The main argument is based on exactly seven words in the ACA “through an exchange established by the state.” The plaintiffs argue that if taken exactly as written the ACA establishes subsidies only for state exchanges. If a state establishes an insurance exchange they get the subsidies. If they don’t, they miss out.

The plaintiffs can also dispute Congressional intent, arguing that those seven words act as a threat; that by not directly addressing a federal exchange offering subsidies is Congress’s way of saying something to the effect of “if you don’t set up an exchange in your own state you’re going to put your residents at a disadvantage. We really want you to set up your own exchange.”

So what about the defense?

The first thing that might come to mind, if you’re a legal nerd, is Chevron deference. That came out of a 1984 case that decided that if there’s a statute that’s unclear or unreasonable courts should defer to how the administrative agency interprets it. In this case that’s the IRS. In 2012 the IRS released a rule discussing that those enrolling in the federal exchange will still be eligible for subsidies. The question then becomes, is this statute unclear and ambiguous?

Another argument boils down to federalism. In a big picture sense, this case truly becomes about states’ rights. An argument in favor of the plaintiffs touches upon this idea- that if the federal government doesn’t step in an offer these subsidies, well then that’s just plain coercion. This sort of parallels the Supreme Court’s finding in regards to Medicaid expansion in 2012. In that case, the Supreme Court found that it should be up to individual states to choose whether to expand Medicaid or not. Taking a literal reading of the ACA, this might be the same as telling states that either they will create their own exchange, or the US government will send their insurance market into a death spiral.

Lastly the defense can also argue Congressional intent. Historically, the Supreme Court has frequently looked at the entire law and its spirit- not just the literal language. Looking at the ACA in this manner, you can argue that it’s clear that Congress didn’t intend for it to be a threat for the states because they offered a fallback option, they offered protection. They created a federal exchange because in the end, the goal of the ACA was for everyone to have access to affordable health insurance.

The hearing

The Supreme Court heard arguments for King v. Burwell on March 4, 2015. Analysts believe that Justices Scalia and Alito are expected to find in favor of the plaintiffs. Justices Ginsburg, Breyer, Sotomayo, and Kagan are predicted to find in favor of the defendants. Justice Thomas was characteristically quiet during the hearing. It will be interesting to see how Justice Kennedy and Chief Justice Roberts vote. The court is unlikely to issue a decision until June or July. We’ll be sure to keep you updated!

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