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A Response to Justice Kennedy from the Heart of Georgia: What Would Georgia Do If the Supreme Court Ruled Against Forcing Federal Subsidies Through “State” Health Insurance Exchanges that the States Didn’t Establish?

U.S. Supreme Court Justice Anthony Kennedy

By Dave Oedel, March 8, 2015, Macon, Georgia:

Should the latest challenge to the Affordable Care Act at the Supreme Court prevail, there’s already considerable speculation at the Supreme Court about what states like Georgia would do next. Would states like Georgia, those that didn’t establish state health insurance exchanges before, then establish exchanges to retain federal insurance subsidies for some of their citizens? The answer matters. It may affect how the legal challenge will be treated by the Supreme Court when it issues its decision, probably during the last week of June, 2015.

Georgia is a special case, because it’s generally considered among the more-likely candidates to establish its own exchange in the event of a challenger victory. But there’s also a good chance, perhaps a better chance, that Georgia won’t establish an exchange even then. U.S. Supreme Court Justice Anthony Kennedy might want to take note of that possibility, and why it is a possibility.

 

King v. Burwell Gets to Oral Argument, and Encounters Justice Kennedy

Last Wednesday, March 4, 2015, in the latest legal challenge to the Affordable Care Act at the U.S. Supreme Court, oral arguments were held, and one voice got the lion’s share of the attention: that of Justice Kennedy. The issue in that case of King v. Burwell is whether to let stand an IRS rule that seems at odds with important language in the ACA concerning which people nationwide should get federal health insurance subsidies through so-called exchanges, which are really more like government rationing systems of graduated subsidies for government-designed insurance policies.

As written, the law would give federal subsidies only to people in states that “establish . . . State” medical insurance exchanges. What about the people in the other 36 states, including Georgia, that have not established “State” exchanges? People from those states would apparently lose insurance subsidies if the challengers’ reading of the words “established by the State” in the ACA’s context is accepted.

The Obama administration, though, pressed the IRS to adopt a rule that was radically changed from its first draft. Initially, the IRS tracked the statutory language. The subsequent IRS regulations, as later proposed and adopted, reflected President Obama’s alternative agenda of fixing the ACA’s design oddities by oval-office or bureaucratic edict.

The final IRS rule indicates that federally-operated exchanges will be deemed to have been established by the states. Based on that interpretation, the federal government has, in essence, been cutting checks to insurance companies on behalf of people in all states, regardless of whether any of their individual states decided to establish their own exchanges facilitating those subsidies.

 

Kennedy Speaks, and Everyone Listens

When Justice Kennedy spoke at the King v. Burwell oral argument on March 4, 2015, the primary point he raised was somewhat unexpected. It had not been briefed by the parties, only by friends of the Court along with op-ed-type commentary by Chief Justice John Roberts’ old constitutional law professor at Harvard, Larry Tribe, who appears to have read and endorsed the most relevant amicus brief.  Tribe had previously trumpeted a version of the tax argument that Roberts used to save the individual mandate in the first challenge to the ACA. Kennedy’s queries immediately riveted the attention of most legal analysts.

In essence, Kennedy warned about reading the ACA in ways that would cause 36 states to have to turn right around and establish state exchanges to funnel federal subsidies to state citizens who have already been receiving the subsidies.

That might be unconstitutionally coercive, Kennedy speculated, in light of the Court’s ruling in the earlier constitutional challenge to Obamacare decided in 2012, NFIB v. Sebelius, in which the Court held that the choice of expanding Medicaid or losing all federal funding for Medicaid was no choice at all, but a gun to the states’ heads. After all, what is it to be a “State” exchange if the federal government is treating the states like drones?

If state conduct is federally dictated through financial manipulation, the voting public becomes confused about who’s in charge, and state integrity is degraded. Helping preserve some substance to federalism — our system that splits the atom of sovereignty into two governments, state and national — is especially important to Kennedy as a legacy of his service on the Court.

 

Why Lack of Notice Isn’t a Constitutional Problem Undermining Many States’ Decisions Not to Establish Their Own Exchanges

Justice Kennedy also pointed out that, when states are confronted with such choices about whether to comply with federal conditions before accepting federal funding, the conditions must be clearly noted before the states can be held to them. It’s a little different in this situation, because the states aren’t themselves getting the subsidies, but the general constitutional instinct is valid because the 10th Amendment reserves rights to the people as well as the states.

The question of which people would get the benefit of exchange subsidies under the ACA was unsettled by December 14, 2012, the extended deadline by which the states were required to decide whether to establish exchanges. The IRS had already taken the position that the federal government would pay subsidies no matter what any state decided, first by a proposed rule in August, 2011, and then by final rule in May, 2012. But that position was being challenged in a well-publicized federal court case, Pruitt v. Sebelius, by Oklahoma Attorney General Scott Pruitt (a case now renamed Oklahoma ex rel. Pruitt v. Burwell). Pruitt amended Oklahoma’s claims in September 2012 to challenge the counter-linguistic, finalized IRS rule.

In other words, Oklahoma’s lawsuit was prominently amended about three months before the exchange establishment decision deadline, was widely reported, and was well known among the relevant states that had questions about establishing exchanges of their own. It strains credulity to suggest, as a number of states recently did in their amicus brief in King v. Burwell, that those states were blind-sided by the possible implications of following the plain language of the ACA.

The final IRS rule was more the cause of confusion than the statute itself, which seemed clear enough even to the IRS in its initial draft of the rule. The petitioners’ straightforward reading of the words, “established by the State,” had been nationally noticed and acted upon in various ways by different states. The administration itself was the primary fomenter of any latent doubt about the meaning by apparently urging the IRS to take a regulatory position in opposition to the statute’s plain words.

During the time all the states were deciding whether to establish exchanges, I was serving as a counsel to Georgia in the first constitutional challenge to the ACA, so perhaps can attest more than most to the basic dynamics of the situation. From what I could see, there was plenty of notice to any states that were watching with even half-open eyes: the act’s language said that the subsidies would only flow to people through exchanges established by their states, the IRS was trying to correct the “mistaken” language, Oklahoma was fighting back in a splashy way, and other states were trying more subtle approaches to resolve the uncertainty.

The administration then, in late 2012, unilaterally postponed the deadline for states to decide whether to establish exchanges. That gave every state a chance to think again. That delay was like a football team, up by one point, calling a timeout to get inside the head of the field-goal kicker in the last seconds of a football game. The apparently-intended message?  Don’t kick the exchanges to the feds.

But most states still didn’t listen up. Hearing a warning is one thing. Reacting to the warning is something else again. Actual, repeated notice seems to have been given to all states, and taken by those states interested in taking notice. As a constitutional law professor, that to me doesn’t sound like a serious constitutional notice problem, more like differences of political opinion wrapped up with an invitation to a possible future game of political chicken.

 

The Knottier Constitutional Problem of Coercion

Justice Kennedy’s first and primary point at oral argument, on possible coercion of the states by a ruling that might, going forward, deprive states of free will, remains a more difficult constitutional question. To the extent states have no choice but to establish exchanges in the wake of the Court’s potential decision in King v. Burwell, it may well matter, at least to Justice Kennedy, in making the decision about what those four words, “established by the State,” mean.

Among other reasons to take Kennedy’s concern seriously are the usual conventions of statutory construction. They tell us to read a statute to avoid an immediate or potential conflict with the Constitution itself. That alone made most analysts, including me, read Kennedy’s colloquy at oral argument Wednesday as signaling that he might side with the federal government to preserve exchange-based subsidies in all states – especially if the states have no practical choice but to do so.

That logic with respect to coercion and the commandeering of states is sensible enough in theory. However, it rests on the supposition that the 36 states that haven’t established exchanges as of 2015 would all rush to establish exchanges upon a ruling adverse to the Obama administration, in effect under implicit federal command.

The case of Medicaid expansion, initially dictated by the ACA prior to the Supreme Court’s ruling in NFIB v. Sebelius, was different. Every single state had already acceded to Medicaid expansion, yet 26 states were simultaneously suing, ultimately in the Supreme Court, to unwind their capitulations.

In that case, the coercion wasn’t speculative. It was evident. Every state was threatened with loss of all federal funding for Medicaid — on average about 53 percent of all Medicaid funding, constituting the single largest federal fund transfer to the states. A gun to the head, indeed.

In the pending case of King v. Burwell, though, we don’t know what the 36 states that haven’t established exchanges would do in the event of a ruling adverse to the federal government’s position. There are many indications that the range of possible responses is genuinely wide open.

 

What Some States Were Thinking Before Deciding Whether to Establish Exchanges of Their Own

Before making their initial decisions about establishing exchanges by the December 14, 2012, deadline, seven states in January 2012 formally questioned the federal government about the serious chance that the people of their states would not be eligible for subsidies if those states did not establish their own exchanges. Not surprisingly for those like me who have dealt under the media radar with the Obama administration on similar questions, those states still, after eleven months, hadn’t gotten what they asked for in assurance – either court certification or an opinion of the U.S. Attorney General declaring the IRS position valid.

It’s also not surprising that four of those concerned states went ahead to establish their own exchanges, thereby ensuring that their states’ people got the subsidies no matter what happened in evaluating the legal validity of the IRS rule.

What’s also interesting in retrospect is that the three other states that joined in that January 2012 letter didn’t take steps to ensure continuation of the subsidies by establishing their own exchanges. Despite their explicit awareness that the IRS rule might well be struck down, Virginia, Maine and North Dakota went ahead anyway, choosing not to establish state exchanges. Because those states in particular were on record as being concerned that the federal government’s position defending the IRS rule was credible and needed settling, it suggests that those states in deciding not to establish exchanges were willing to consider jettisoning the subsidies even if the IRS rule were later deemed invalid.

In other words, we already have some experience with states seriously pondering the possibility of a post-exchange-subsidy world because of an IRS rule later being invalidated. In the first instance of eyeballing that question, seven states seemed to split roughly equally on the question of what they might want to do about establishing exchanges if the IRS rule were later declared unlawful.

 

Why Georgia is Viewed as an Inevitable Candidate to Establish an Exchange

Georgia is not like a number of other states that are pretending now not to have recognized that the subsidies might stop flowing if Oklahoma or others like King were to win their cases for the ACA’s statutory language and against the IRS rule. Like most other states, Georgia did elect in late 2012 not to establish its own exchange. But unlike other red states, Georgia only did that after its insurance commissioner explicitly acknowledged that the IRS was taking the position that subsidies would be provided regardless of whether Georgia decided to establish an exchange.

In choosing not to establish an exchange, Georgia appeared to some to be relying on the IRS rule being upheld. This intriguing, unique history of Georgia’s non-establishment was noted both in the federal government’s brief in the King case at the Fourth Circuit, and at the Supreme Court in Georgia’s amicus brief with six other states.

Does that mean that Georgia, if the IRS rule is struck, will then rush to establish its own exchange to secure continued subsidies for its citizens if the Supreme Court reads the language of the act literally? Defenders of the federal subsidies, and perhaps Justice Kennedy, seem to think so, imagining from afar that Georgia would be the easiest case of all in which to predict a likely establishment of a state exchange after a possible Supreme Court ruling against the IRS position.

But from a Georgia insider’s perspective, even in atypically-Obama-leaning Macon-Bibb County (even I voted for Obama once), near Georgia’s heart, it’s still a good question just what Georgia would do if the challengers prevail in King v. Burwell. There are too many variables, considerations and dynamics at play to predict Georgia’s reactions with any kind of certainty. Georgia’s people, the insurance industry, the state’s other interests, the Obama administration, Congress, and the Supreme Court, too, all will have a hand in affecting what might happen in Georgia if a decision issues in King v. Burwell striking the IRS rule.

I would not bet on Georgia doing one thing or another. If I had to predict, though, I’d predict that Georgia would decline to adopt its own exchange in the wake of a challenger victory in King v. Burwell.  Here’s why.

 

Factor One: Would Most of Georgia’s Subsidy Recipients Particularly Care?

One reason for doubt about Georgia’s possible reaction to King beating Burwell at the Supreme Court is doubt about what the subsidies have proven to be worth since the federal government has in effect been writing exchange subsidy checks to the insurance companies. For many people here in the heart of Georgia, at least, the subsidies look more like bonanzas for the insurance companies, not for the people.

Though insurance companies can contribute to campaigns, Georgia’s politicians know that it’s still the people who vote. As Georgia said in its amicus brief, the ACA is “overwhelmingly unpopular” in the state. That description was no hyperbole. Part of that sentiment has to be because the recipients of federal exchange largesse aren’t as thrilled about the largesse as Obamacare boosters might like to believe.

True, recipients of subsidies get discounted medical insurance premiums on a scale that varies with income. But if you don’t get to use the insurance much, if at all, because of prohibitively high deductibles and co-pays, that’s not saying much. It’s like getting a discounted pass to a show where they sit you behind a pole, then gouge you for the concessions. Thanks a lot.

For most middle Georgians of modest incomes with deductibles of $5,000 (for bronze plans) or $2,000 (for silver plans), followed by 40 or 20 percent co-pays, respectively, exchange-purchased insurance is often little more than a prayer to an insurance company for help in very serious situations.

Most people around here in the heart of Georgia aren’t expecting such medical conditions anytime soon, or applying to insurance companies for protection in the meantime. They know what insurance companies are, and what they aren’t — dispensaries of Christ-like charity. Because most Georgians getting the subsidies are choosing the desultory bronze or silver plans, and don’t have serious medical conditions, they’re often underwhelmed by the plans. Sometimes they’re downright hostile to the policies after trying to rely on them in routine circumstances, according to reports.

In short, most insurance products offered through the exchanges are of spartan, often-useless quality. Therefore, switching to other options, even unsubsidized, might not be perceived by the most affected people of Georgia as such a bad result. Several politicians with whom I’m familiar in Georgia attest to having that feel for the issue essentially in their political bones, because that’s what many people locally are saying or intimating to them, even though the reactions are anecdotal, particularized and unverified scientifically.

 

Factor Two: What Would the Insurance Companies Do?

Although insurance companies aren’t suddenly going to start acting Christ-like if the federal exchanges no longer funnel subsidies to them, the companies can be predicted to start acting true to form, i.e., to scramble about to try to sell some insurance. It’s entirely possible, even probable, that new, more useful and more popular products would be offered were the exchange subsidies to end in Georgia. That wouldn’t be hard to do, because in many places in Georgia outside of Atlanta, there are only one or two insurance companies left writing policies in the wake of the federal takeover of this substantial market segment.

The insurance companies would by the end of 2015 probably be freed by Georgia’s insurance commissioner from their gold, silver, bronze and platinum handcuffs, and could compete again on terrain that they might prefer to compete on, and for products that people might prefer to buy. True, some existing players might bail out of the Georgia market after year’s end to avoid the adverse selection problem of only the sickest people retaining their newly unsubsidized policies, but other companies would likely rush in to gobble up the healthier customers who terminated their exchange plans.

With competition having been squeezed out of our insurance markets in Georgia outside of Atlanta, there could be a breath of fresh air in the insurance options available, and the number of companies supplying them. Even without subsidies, those new products and providers might be more attractive to Georgia’s citizens, at least in terms of design features, range of options and service.

 

Factor Three: How Credible is the Death Spiral Threat?

Justice Kennedy at oral argument in King v. Burwell interjected that, “from the standpoint of the dynamics of federalism, it does seem to me that there is something very powerful to the point that if [the challengers’] argument is accepted, the states are being told either create your own exchange, or we’ll send your insurance market into a death spiral.”

The “death spiral” concept is essentially that, if insurers are required by other aspects of the ACA to write policies without regard to health status, claims history, gender, etc. (“adjusted community rating”), and to guarantee issuance of policies despite existing sickness of the applicant (“guaranteed issue”), there will be a so-called adverse selection problem by which only the sicker people will be covered, costing the insurers more per insured, and ultimately driving insurers from the market. In the particular context of King v. Burwell, the dark, death-spiral prospect is that the lack of subsidies, combined with community rating and guaranteed issue rules, will remove many people from the insurance markets, leaving only the sickest and most expensive people still paying for their policies, and insurers running from or dying on the field.

Versions of such dire predictions of mortal wounds to insurance companies and the ACA have been circulated by ACA defenders since its birthing five years ago, when the insurance company daddies watched attentively at bedside, or at least from K Street. Nonetheless, adverse selection, let alone a death spiral, has yet to be seen in any significant ways despite disappointing enrollments coming in consistently below predictions. Apparently the insurance company actuaries have been savvier than the federal government’s bean counters from the git go.

For instance, the federal government in the earlier Supreme Court challenge to the ACA argued vehemently that if people were not required to buy insurance on pain of criminal violation, the entire system would fall apart — that marginally fewer numbers of enrollees would make all the difference between system-wide success and failure. Although a modified form of the individual mandate was preserved after that case thanks to Chief Justice Roberts’ creative re-writing of the act, a not-dissimilar spate of under-enrollments occurred anyway, but mostly for other reasons. Yet no obvious problem with adverse selection occurred, let alone a death spiral.

The same general phenomenon of death-spiral alarmism has been sounded with respect to the cohort of the population covered by the exchanges. The most recent prediction of the Congressional Budget Office had been that 13 million Americans would be covered by the subsidized exchanges by the end of 2015. However, Health and Human Services Secretary Sylvia Mathews Burwell testified in November, 2014, that HHS expectations now are that only 9.0 to 9.9 million people will be covered through the exchanges by the end of 2015 – about a 30 percent or greater reduction in estimate – even if HHS and Burwell win the King lawsuit at the Supreme Court.  Moreover, Burwell revealed in her November, 2014, testimony that, of the 8 million people enrolled in subsidized exchanges by the spring of 2014, only 7.1 million remained on the rolls by mid-October – an 11 percent decline over only six months.

Not only do these officially-conceded statistics tend to confirm that people are not especially enamored of the subsidized, exchange-procured insurance. The statistics also suggest that death spiral fears have been exaggerated. There have been great under-enrollments and de-enrollments already, yet the insurers seem not to be jacking their prices beyond historical trends.

A rough accounting of the situation writ large may help us understand why. If there are, say, 315 million people in the U.S., and only 10 million people are covered through the exchanges by the end of 2015, that’s less than three percent of the population. It’s hard to see catastrophic economic circumstances flowing to insurance companies from something only affecting three percent of the population, and that cohort being affected only on a sliding scale. A moral issue for a particular slice of the population? Perhaps. An economic calamity to the insurers? Please.

In short, death spirals have been breathlessly predicted due to potential ACA under-enrollments for five years now, yet we still haven’t seen any insurance companies writhing in the throes of corporate death or reorganization. Quite the opposite. The ACA has been profitable for the insurance companies’ bottom lines. On balance, the insurance companies seem to have benefited more fully from the ACA than most people, and seem capable of making a buck in a post-exchange-subsidy world in states not choosing to establish exchanges.

 

Factor Four: Would Georgia’s Big Employers Oppose Establishing an Exchange?

An under-examined implication of the issue in King v. Burwell is that, under the ACA’s adjustment to section 4980H of the Internal Revenue Code, the very existence of a state-established exchange is a predicate before large employers of 50-plus or 100-plus employees (depending on the circumstances) can be tagged with penalties for not covering employees working 30 or more hours per week with qualifying health insurance. Therefore, states deemed not to have established their own exchanges will have a competitive advantage in attracting and retaining employers in comparison with states that have established their own exchanges.

Although most large employers do already offer health insurance to employees working 40 or more hours per week, that has not been true in all employment sectors like food service and hospitality, or for employers with significant numbers of employees working between 30 and 40 hours per week. Moreover, large employers are increasingly considering the option of not covering some of their employees with medical insurance. The trend, fostered by the ACA itself, is away from employer-provided medical insurance.

Incidentally, states, localities and their agencies themselves typically qualify as large employers, so this may also have direct implications for them to the extent that they do not offer insurance to employees working 30-40 hours per week.

In the case of Oklahoma ex rel. Pruitt v. Burwell, a federal district court decided in September, 2014, that the ACA’s exchange-triggered penalty for violation of the employer mandate was an unconstitutional commandeering of those states not choosing to establish exchanges. That decision is being held in abeyance of the King v. Burwell decision.

 

Factor Five: What Would the Administration Do?

Despite the Obama administration’s protestations that there’s nothing it could do to stave off practical disaster for the ACA if the Supreme Court were to rule against the IRS rule in King v. Burwell, there are a number of things that it could do administratively, and other things that it could suggest or graciously consider legislatively, that could at least buy some time on the issue, or do much more in the way of reforming Obamacare to make it viable beyond the presidency of Barack Obama.

The first and most obvious thing that the administration can and probably would do as a regulatory matter would be to continue the subsidies, no matter what, through the end of 2015. That is the normal IRS position taken when such legal adjustments to tax rules are mandated by the courts, according to one leading tax expert.  This would require no special decision, just letting the IRS hew to its default practice. Incidentally, this would make it unnecessary for the Supreme Court to have to defer the implementation of its ruling to the end of the tax year, a prospect raised by Justice Samuel Alito during oral argument in King v. Burwell. The IRS is already a step ahead of him.

There are other more as-yet-unformed things that the administration might also do. For instance, the administration could streamline the system for states to establish their own exchanges. The administration could facilitate ways for some states to piggy-back on other states’ better experiences with exchange software and systems. And the administration could explore giving some flexibility to more-creative-thinking states about what an “exchange” might mean and look like.

The administration would also be free to approach and work with Congress before the end of 2015 to consider alternatives to the ACA exchange system altogether. Among the options that might be more palatable to many red states would be readjustments to the exchange system that would simultaneously address the existing problem of no coverage at all for those people left in the gap between unexpanded Medicaid and the exchanges. And an even more creative solution could involve rethinking the relationship between Medicaid and the exchanges altogether that could, in the process, improve the dismal health outcomes experienced by Medicaid recipients, as found in Harvard’s studies of the Oregon Medicaid experience.

The Obama administration has recently shown some grudging flexibility in the optional Medicaid expansion context by negotiating deals with states like Indiana that have otherwise been reluctant to expand Medicaid.  That kind of negotiation could help provide a template for meaningful reform of the ACA without jettisoning the act’s, and the administration’s, basic goals of broader, better and more affordable coverage for all Americans.

 

Factor Six: What Would Congress Do?

Solicitor General Donald Verrilli Jr. snidely deprecated Congress at oral argument last Wednesday, deriding in advance any potential congressional ability to act. When responding to Justice Antonin Scalia’s statement that Congress could act if a “crisis” were to occur, Verrilli mocked, “this Congress . . . ?” and left the gallery laughing. Nonetheless, there’s some reason to believe that Congress, both houses of which are now controlled by Republicans, could pass legislation addressing at least the exchange subsidy issue, and work with President Obama to achieve the most essential fixes in the wake of a negative decision for the administration in King v. Burwell.

It is in President Obama’s namesake healthcare legacy interest to do so, and also in the Republicans’ interests to demonstrate governing capacity after their election victory in 2014. The Republicans have a special incentive to act now because they can redeploy the exchange subsidies in a more felicitous form without violating no-tax pledges or dealing with bill-scoring pay-go concerns. The Democrats already attempted to offset the ACA subsidies in the original 2010 legislation.

A number of Republican proposals are already percolating in Congress. One plan put forward by three Republican senators last week would cover anyone losing subsidies for a transitional period, and then let states opt out of Obamacare with more creatively designed programs tailored to their populations and conditions.  Meanwhile, three powerful House chairmen also last week proposed an “off ramp” that would let states opt out of the ACA to empower people to choose a wider variety of plans, and also provide financial help for people to buy the coverage they prefer.  Those proposals sound sufficiently overlapping to indicate that the Republicans are getting serious about putting up alternatives that could pass both bodies to relieve the states and their people from making awkward choices.

 

Factor Seven: What Would the Court Do?

The Supreme Court itself has shown its own propensity for thinking up creative re-imaginings of congressional handiwork before, and it could do so again. Depending on just how the Court rules, and what kind of tethers and directives it makes with respect to its own ruling, states like Georgia might be affected in their subsequent decisions about whether to adopt exchanges.

On the other hand, if the Court simply struck the IRS rule and left Congress and the states to work it out, that in itself would probably most directly help the states in their subsequent role in working with the administration and Congress to pick up the pieces. If Justice Kennedy is really a fan of federalism, a straightforward ruling striking the IRS usurpation of congressional authority and state autonomy would probably be the most direct way simultaneously to restrain bureaucratic overreach and bolster state power.

 

Factor Eight: What Would the People Do?

As important as the states’ interests may be, ultimately the talismanic constitutional concern must be to advance the interests of all the people. The presidential campaign of 2016 is already underway in its early stages, and no Supreme Court decision in King v. Burwell is going to take much practical effect until 2016, by which time the presidential campaign will be in a full-throated roar. Early indications suggest that competing versions of health insurance reform will be high on the roster of campaign issues.

If part of the motivation for the 2012 decision by the Supreme Court on the first challenge to Obamacare was to let the people decide about Obamacare’s fate in the presidential election later that year, the same motivation could just as fairly be at stake here. By deciding against the IRS rule on federally-operated exchanges, the Supreme Court would not be leaving the people adrift, but allowing them, if they wish, to let the Court’s ruling stand, or be somehow clarified and corrected, in the context of the 2016 presidential selection.

 

In Conclusion, One Last Constitutional Concern

As I’ve noted, several presently-uncertain factors raise doubts about whether all states without state exchanges will act in a monolithic, coerced way if the Supreme Court rules against Burwell, the IRS and the federal government. Georgia provides one example of a state up in the air. If Georgia cannot safely be predicted to establish its own exchange should the federal government lose in King v. Burwell, chances are that the reactions of many other states also cannot be predicted.

If the Supreme Court imagines that the states without their own exchanges would be constitutionally coerced to establish state exchanges in the aftermath of its King v. Burwell decision, the Court would thereby be violating a basic tenet of Article III of the Constitution: that the courts should hear only live, concrete cases and controversies between parties with standing, with a dog in the fight.

If coercion may present itself after a ruling here, the time to address such claims is later, in their own proper lawsuits (if any), after the dynamics, players and facts have become clear. Right now, any case for coercion is speculative, and therefore unconstitutionally unripe.

Currently there are "20 comments" on this Article:

  1. […] another point that has surfaced a few times throughout this debate, including in a recent post by David Oedel: whether it should matter to the anti-coercion argument that some states appear unlikely to […]

    • Dave Oedel says:

      If you press the author i.d. tag on this comment from “Bill of Health,” you’ll be directed through a hyperlink to BU law professor Abigail Moncrieff’s discussion today of some coercion issues that Moncrieff prominently helped raise in the amicus brief that seems to have informed Justice Kennedy, Larry Tribe and others in the oral argument last Wednesday at the U.S. Supreme Court. Here’s the link in the raw:

      https://blogs.law.harvard.edu/billofhealth/2015/03/10/two-more-points-on-federalism-in-king-v-burwell-a-response-to-ilya-somin/

      And here is part of what Moncrieff wrote in her Harvard blog today, conceding unripeness and constitutional difficulty, but concluding instead that the way out of that problem is to read the statutory interpretation issue the federal government’s way:

      “Both of these questions are extremely difficult conceptual questions, and both are unanswered in the current doctrine. Oedel argues on that basis that the Court should not address the constitutional merits in this case, and I totally agree. But the difficulty and novelty of these constitutional questions is a compelling reason for the Court to apply the avoidance canon to disfavor the plaintiffs’ interpretation in King. That is, after all, the canon’s purpose: to allow the Court to avoid confronting difficult constitutional questions.”

      Another view of the statutory interpretation question was advanced, also today, by Rob Natelson, a perspective that you can link to here: http://constitution.i2i.org/2015/03/10/king-v-burwell-the-latest-obamacare-mess-at-the-supreme-court/

      Natelson appears to be one of those free-thinking law school professors who found a decidedly cold shoulder within the left-tilting legal academy. Natelson is now out of there, and making constitutional waves driving up from the deep.

  2. Steve says:

    As to the question, “Would Most of Georgia’s Subsidy Recipients Particularly Care?” I can only say that this self-employed individual definitely DOES care. I operate my own business, and have to purchase my own insurance, which was a tremendous burden prior to the ACA. Our premiums were sky-high (about 25% of income) due to pre-existing conditions. I now pay significantly less for a much better policy which was purchased through the Exchange. My family will suffer greatly if this is repealed. I’m not saying that “Obamacare” is the answer, but it’s light years better than what I had before. I know the State of Georgia will do absolutely nothing to fill the vacuum if this is struck down.

    • Dave Oedel says:

      Thanks for your personal plug for coverage of preexisting conditions, Steve. Not sure what those preexisting conditions were in your family’s case, but the insurance companies apparently priced coverage of them higher than the government did. What should we take away from that as a matter of general public policy? How much should the public be responsible for covering more than the market price of coverage? I personally don’t claim to know, or know how to know, the answer. And I doubt that a “market” solution is the only or best answer in every circumstance. What say you? How would you determine the appropriate allocation of resources to the healthcare industry, and its customers?

  3. […] in on federalism-related arguments in a column for Verdict and a post at Dorf on Law. And in the Macon Monitor, David Oedel considers the possibility that his home state of Georgia might not establish its own […]

  4. Peter Rose says:

    How credible is the death spiral threat? Apparently credible enough that four Justices included this paragraph in the NFIB dissent:

    In the absence of federal subsidies to purchasers, insurance companies will have little incentive to sell insurance on the exchanges. Under the ACA’s scheme, few, if any, individuals would want to buy individual insurance policies outside of an exchange, because federal subsidies would be unavailable outside of an exchange. Difficulty in attracting individuals outside of the exchange would in turn motivate insurers to enter exchanges, despite the exchanges’ onerous regulations. That system of incentives collapses if the federal subsidies are invalidated. Without the federal subsidies, individuals would lose the main incentive to purchase insurance inside the exchanges, and some insurers may be unwilling to offer insurance inside of exchanges. With fewer buyers and even fewer sellers, the exchanges would not operate as Congress intended and may not operate at all.

    • Dave Oedel says:

      Peter Rose, the dissenters there weren’t talking about a general death spiral, but about whether the exchanges themselves would be viable competitors in the insurance markets without subsidies. Different point. Even if they were buying into a death spiral vision, that was almost three years ago, and speculative. Today we have experience with serious under-enrollment and de-enrollment — and still no death spiral.

      • Peter Rose says:

        Hardly. The quoted paragraph is from the section of the dissent headed “Health Insurance Exchanges and Their Federal Subsidies,” and it very clearly stands alone as an analysis of the consequences of the unavailability of subsidies–and, particularly, that the intent of Congress was for subsidies to be available to all purchasers on an Exchange.

        As for your claim that “[t]oday we have experience with serious under-enrollment and de-enrollment — and still no death spiral.” We also don’t have Exchanges without subsidies, which is the trigger, so your claim is completely beside the point.

        • Dave Oedel says:

          Peter Rose, the fact that this issue was segregated in the NFIB v. Sebelius dissent makes my point and undermines yours. Your second point I agree with to the extent you’re acknowledging that the coercion issue is unripe.

  5. cwolf says:

    …unconstitutionally unripe.
    What does that mean???
    Get a grip.

    • Dave Oedel says:

      cwolf, sorry for my inartfulness in discussing the problem of trying to reach a question, like the coercion issue that might potentially flow from King v. Burwell, that has not yet hardened into a case or controversy that is the constitutional threshold for hearing a question in a federal court. A more careful statement of the ripeness doctrine was made by the Supreme Court in its 1967 case of Abbott Labs:

      “Without undertaking to survey the intricacies of the ripeness doctrine it is fair to say that its basic rationale is to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements over administrative policies, and also to protect the agencies from judicial interference until an administrative decision has been formalized and its effects felt in a concrete way by the challenging parties. The problem is best seen in a twofold aspect, requiring us to evaluate both the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration.”

      • dcesq says:

        Funny. That same threshold appears not to have been met for the plaintiffs in this case.

        • Dave Oedel says:

          dcesq, standing is also a constitutional requirement, but there are a couple of differences here. The Solicitor General didn’t press the issue and accepted the bona fides of the plaintiffs/petitioners in this case, though the WSJ and Mother Jones through good reporting have called the “injuries” of three of four of these individuals into serious question. But as the Chief put it at oral argument, what are we going to do about that now, have a trial on standing? Of course, the Court could decline to decide the King case and remand, but it’s really in the same position as the SG on this question. There are some airtight standing cases out there that reach most of the same substance, including the Oklahoma case. If this particular case were remanded, the pushers of this suit would just scurry around and find some people with airtight cases, and amend to include them. All that would do is just delay the joining of issue. And if you expect to join issue on the matter eventually, probably better to do it sooner rather than later. I think that’s what the SG was thinking by not pushing it, and why most of the justices just let the standing issue drop except for Justice Ginsburg. The key difference is that there is obvious and imminent harm to some people and states out there like Oklahoma, whereas the coercion possibility is really just speculation at this point. Maybe coercive, but maybe not. You can’t say that about the people and states who are aggrieved by the exchanges. To the extent there ever will be a legal harm there, it is immediate harm.

  6. […] in on federalism-related arguments in a column for Verdict and a post at Dorf on Law. And in the Macon Monitor, David Oedel considers the possibility that his home state of Georgia might not establish its own […]

    • Dave Oedel says:

      Glad to have this blogger on board, but the quoted text is really the work of Amy Howe as published today on the front page of SCOTUSblog.com. Here is the original link: http://www.scotusblog.com/2015/03/wednesday-round-up-264/

      Being on the front page of SCOTUSblog is important in cases like this, because virtually all the Supreme Court clerks and at least some, if not most, of the justices are also perusing it, from insider reports.

  7. Robert Levine says:

    “If the Supreme Court imagines that the states without their own exchanges would be constitutionally coerced to establish state exchanges in the aftermath of its King v. Burwell decision, the Court would thereby be violating a basic tenet of Article III of the Constitution: that the courts should hear only live, concrete cases and controversies between parties with standing, with a dog in the fight.”

    I don’t believe that’s consistent with the canon of constitutional avoidance, and I suspect it’s in conflict with New York v. United States as well.

    “It strains credulity to suggest, as a number of states recently did in their amicus brief in King v. Burwell, that those states were blind-sided by the possible implications of following the plain language of the ACA.”

    No it doesn’t. An example; not only did Wisconsin Governor Scott Walker state quite explicitly that the HHS exchange established for Wisconsin provide subsidies, but some 80,000 people were thrown off Medicaid and told to get their insurance on the exchange itself, predicated on subsidies being available. I don’t think anyone thought that folks who had been on Medicaid were suddenly going to be able to afford private insurance without subsidies.

    • Dave Oedel says:

      Robert Levine, on the constitutional avoidance issue, that is a fair view that you apparently share with Abigail Moncrieff. The justices will have to weigh that issue. I am probably too close to the issue fairly to comment, given my commitment to another overarching way to think about the case.

      But that’s why we have these folks working for us on life tenure — a constitutional core predicate that I support, incidentally, no matter if Justice Ginsburg should fall asleep at some boring, predictable SOTU event. I too fell asleep fairly recently at a December Nutcracker performance at Macon’s Grand Opera House (but please don’t tell anyone) — and Justice Ginsburg is a generation ahead of me. I really appreciate her work ethic, even if her instincts are not what I would follow were I in her position.

      On what Scott Walker knew, or should have known, you will have to ask him, not me. As for the states themselves, they have no meaningful defense about not knowing the consequences for the reasons I stated already, and for reasons that I could embellish.

  8. Smithe60 says:

    I know this if off topic but I’m looking into starting my own blog and was curious what all is required to get set up? I’m assuming having a blog like yours would cost a pretty penny? I’m not very web savvy so I’m not 100 positive. Any recommendations or advice would be greatly appreciated. Thanks eedfdeekeeeaggek

    • Dave Oedel says:

      With WordPress, a solid web hosting service like InMotion Hosting, and some semi-pro customized help with web design and operation, most people who are interested can initially put together a serviceable website or blog at costs not much beyond a thousand or two. The bigger barrier to sustainability in web publishing is the more difficult question of why the publisher wishes to publish. If you can answer that question with clarity and enthusiasm, you have a pretty good answer to whether you should proceed with your own venture.

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