MARY AGNES CAREY: Welcome to Health on the Hill, I’m Mary Agnes Carey. The Affordable Care Act is headed back to the Supreme Court. At stake are millions of subsidies that help people in more than three-dozen states afford health care coverage. Julie Rovner, a senior correspondent for Kaiser Health News, joins me now to discuss the case. Hi Julie.
JULIE ROVNER: Hi, Mary Agnes.
MARY AGNES CAREY: What’s this all about? Lay out the case for us.
JULIE ROVNER: Well, it’s certainly not about the constitutionality of the Affordable Care Act. A lot of people are saying that. This is what’s known as a statutory interpretation case, something else that the Supreme Court tends to do when there’s an argument over what Congress meant. Basically, the Supreme Court acts as a referee. And that’s basically what they’re doing here.
MARY AGNES CAREY: And what are the legal arguments on both sides?
JULIE ROVNER: Well, the challengers in this case say the phrase “established by a state” means that only tax credits that are given out in state exchanges are allowed. And that means, as you mentioned, more than three-dozen states that are using the federal exchange, healthcare.gov, can’t provide tax credits to people. Now they say Congress intended to do this in an effort to pressure states to create their own exchanges. Those on the other side, including the government and the people who wrote the law say that’s not the case at all. It was just sort of an odd way that sentence was written and Congress always intended for tax credits to be available to everyone regardless of whether the exchange was established by a state or the federal government. And that’s basically what’s at stake here. We’re looking at a regulation by the Internal Revenue Service that implements that portion of the law that tax credits and the IRS said that everyone should be able to get those tax credits.
MARY AGNES CAREY: Everyone to receive them whether in the state or the federal exchange.
JULIE ROVNER: That’s right. Everybody who’s eligible regardless of who’s running the exchange.
MARY AGNES CAREY: So what happens if the court rules that people in the federal exchanges can’t get these subsidies any longer?
JULIE ROVNER: Well both sides agree on this; and the answer is basically chaos. It would be kind of a mess. Several states actually tried to reform what’s called the non-group market, the individual insurance market, by making insurance available to people with pre-existing conditions but without help for other people to buy insurance or to require them to buy insurance. And it did not work very well. In Kentucky, basically every insurer left the state when they tried it in the 1990s. There are various estimates. Somewhere around 7.5 million people would likely lose their subsidies. Because of the way the law is written, if insurance costs more than 8 percent of your income, you’re not required to buy it. So most of those people would not buy insurance. They wouldn’t have to. The people who would buy insurance are probably the people who need it the most. That would result in a risk pool that is sicker and therefore premiums would have to go up. Estimates are that premiums would go up somewhere in the neighborhood of 35 to 45 percent. Obviously for people who were getting subsidies, their costs would go up enormously. The average subsidy is about $268 and that covers somewhere in the neighborhood of three-quarters of their premium. So they would basically be priced out of these markets. Insurance companies are very worried about this. Hospitals and other health care providers are also worried about this. They’ve all written amicus briefs to the court saying this would be a real disaster if the subsidies were not available in these states where the federal health exchange is being used.
MARY AGNES CAREY: So on Wednesday we’ll have the oral arguments and then the judges begin their deliberations. Take us through some of the issues that guide those deliberations.
JULIE ROVNER: Well as I mentioned this is what’s called a statutory interpretation case. They have to decide whether Congress intended for the subsidies to be available in the state and federal exchanges or just in state exchanges. And mostly when they get these cases, they use what’s called Chevron Deference, that’s a reference to a 1984 case. The way it works is that first it’s a two part test. They look at the language of the law and they say, “Is it straightforward or is it ambiguous?” If they find it ambiguous, then they are suppose to defer to the agency, in this case the IRS, as long as the IRS’ interpretation isn’t unreasonable. That’s why the challengers in this case are trying to make the case that Congress intended for the tax credits to be denied to people using the federal health exchange because that would make the IRS’ interpretation unreasonable, because only if the interpretation is unreasonable, would the Supreme Court then overrule it.
MARY AGNES CAREY: There’s also some issue involved where if the federal government is going to change something with the states, they have to tell the states they’re doing that. That’s one of the issues here.
JULIE ROVNER: That’s right, a number of states in their court filings are saying that when they were deciding whether or not to have a state exchange, they didn’t know, no one ever told them there was a possibility that their residents wouldn’t get these tax credits if they didn’t create an exchange and that’s a violation of other sort of previous court rulings that said you can’t limit things, that you can’t limit what they states get if you don’t tell them what their options are. And frankly as someone who covered this law from its inception, I certainly never heard anybody talk about the idea that only states exchanges would have access to the tax credits. It simply was never discussed.
MARY AGNES CAREY: Thank you so much Julie Rovner, Kaiser Health News.