Oral arguments are scheduled March 4 before the U.S. Supreme Court in the King v. Burwell case, otherwise known as the “Obamacare subsidy lawsuit.” The justices are expected to issue a final ruling in June, but even if the plaintiffs win, they are not asking Obamacare to be overturned. They’re asking that the law operate as written.
Basically, the federal health law states that health insurance subsidies can be distributed only through state-based exchanges and not in states with federal marketplaces. Because subsidies are limited to state exchanges, the plaintiffs residing in federal exchange states wish to be freed from Obamacare’s employer and individual mandates. They argue that the IRS has overstepped its bounds by shoveling taxpayer money illegally into the 36 states that have established federal exchanges.
If the court strikes down subsidy distribution in federally established exchanges, over 10,000 employers, 2.5 million employees, and 400,000 individuals in North Carolina would be exempt from Obamacare’s employer and individual tax penalties.
On the other hand, outrage would ensue. The absence of subsidies would expose millions of North Carolinians to the full cost of Obamacare health insurance premiums.
Policy commentators suggest that this could be avoided if states switched from federal to state-based exchanges. Yet for North Carolina to make this transition, the seed money needed to establish a state exchange is no longer available. North Carolina laid the groundwork for its own exchange under former Gov. Beverly Perdue, but more than $70 million in startup grants were returned to the feds once Republicans took control of the legislature.
Despite Republicans’ opposition to the federal health law, a recent New York Times article by Robert Pear indicates that some GOP legislators, along with attorneys general in many federal exchange states, may be distancing themselves from endorsing King:
Six Republican state attorneys general — in Alabama, Georgia, Nebraska, Oklahoma, South Carolina and West Virginia — filed a brief agreeing that subsidies were illegal if distributed through the federal marketplace. … But 31 states have Republican governors, and most did not file briefs. State-level Republicans were far more involved in the landmark 2012 case challenging the constitutionality of the Affordable Care Act, when more than two dozen Republican attorneys general were plaintiffs.
Will anti-Obamacare North Carolina legislators hold fast to their constitutional principles? Federal exchange states including Ohio and Missouri introduced legislation titled the Health Care Freedom Act 2.0, which would suspend insurers’ licenses if they accepted subsidies from the federal government.
The new congressional majority has more opportunities to propose a fix to this unworkable law. Medical care certainly can be more affordable with fewer of the taxes and regulatory requirements Obamacare imposes. And insurance companies can provide competitive coverage for individuals with pre-existing conditions by offering portable, secure, guaranteed renewable policies.
A popular proposal co-sponsored by U.S. Sen. Richard Burr, R-N.C., advises the repeal of all 20 of Obamacare’s taxes and fees that affect employers, insurance companies, medical device companies, and individuals. Instead, it proposes the liberalization of exchanges so insurers can be more flexible with the products they offer.
Burr’s plan also calls for a universal, refundable tax credit to be distributed to individuals as an incentive for consumers to purchase suitable health plans.
However, libertarian critics argue that a universal tax credit merely redistributes taxpayer money. They prefer a tax deduction combined with large health savings accounts. Louisiana Gov. Bobby Jindal’s JindalCare plan supports this strategy, and Cato Institute scholar Michael Cannon is fine-tuning his proposal as to what Congress can do.
Stay tuned for more details on this.
Katherine Restrepo is health and human services policy analyst for the John Locke Foundation.