By Grace-Marie Turner
Oral arguments before the U.S. Supreme Court on Wednesday in King v Burwell took a surprising turn when Justice Anthony Kennedy said he thinks there may be a constitutional question in play.
Justice Kennedy expressed concern that if the federal government really intended only to give subsidies to states that built their own exchanges, it could be an “unconstitutional form of federal coercion.”
“Justice Kennedy expressed deep concern with a system where the statute would potentially destroy the insurance system in states that chose not to establish their own exchanges,” according to SCOTUSBlog. Because the subsidies are so integral to making the exchanges work, the government essentially would be forcing states to build them, Kennedy asserted.
Impact on health insurance markets
First of all, it is not at all clear, as Avik Roy writes, that such destruction to health insurance markets would result: The United States managed for a century to have health insurance markets operating without the help of federal exchanges. It even managed to survive for nearly four years without exchanges between the time the ACA passed and was implemented.
Should the Supreme Court decide that the IRS acted illegally with its rule to allow subsidies through federal exchanges, Congress could take care of those who would lose their subsidies and in many cases their insurance. The insurance markets would quickly recover and likely be more transparent and efficient than before.
An estimated nine million people currently have health insurance through federal exchanges, one twentieth the number of people in the country with private health insurance. About two thirds of those receiving ACA subsidies are getting them through federally-facilitated exchanges. Those are the people that Congress would be focusing on with post-King solutions.
Given more freedom, states could encourage health insurance companies to offer more flexible, affordable policies. Subsidies would be needed, especially for those with expensive medical conditions, but a new health insurance market would emerge for those currently in the exchanges – many of whom had their policies cancelled because they didn’t comply with ACA rules and mandates.
Originally published on Forbes, March 7, 2015