Thursday, March 05, 2015

Could the Supreme Court Give Congress and the States Enough Time to Fix Obamacare? Probably Not.

Guest Blogger

Timothy Jost

Yesterday's Supreme Court argument in King v. Burwell went largely according to script.  Michael Carvin, cheered on by Justices Scalia and Alito, pressed his argument that a federally facilitated exchange cannot conceivably be an “exchange established by the state,” and cannot, therefore, possibly issue premium tax credits because a subsection of the section on computing those credits refers to exchanges “established by the state.” 

Solicitor General Verrilli, on the other hand, aided by Justices Sotomayor, Ginsburg, Kagan, and Breyer, pointed out that if one reads the statute as a whole, it becomes clear that federally facilitated exchanges are the exact equivalent of state-operated exchanges, with all the same powers.  Moreover, as Justices Sotomayor and Kennedy pointed out, accepting the plaintiffs’ reading of the statute would raise serious questions of unconstitutional coercion of the states, which would face the destruction of their insurance markets effectively without warning.

There was, however, one big surprise in the argument.  About an hour in, Justice Alito said in response to the Solicitor General’s description of the chaos a judgment for the plaintiff would cause:
Would it not be possible if we were to adopt Petitioners' interpretation of the statute to stay the mandate until the end of this tax year as we have done in other cases where we have adopted an interpretation of the constitutional -- or a statute that would have very disruptive consequences such as the Northern Pipeline case?

While there has been some discussion regarding Congress enacting delaying legislation if the Court comes down on the side of the plaintiffs, the possibility of the Court itself delaying its mandate has not been widely considered.  Solicitor General Verrilli appropriately questioned the legality of this possibility.  Article I, Section 9, of the Constitution prohibits the expenditure of funds from the Treasury except by lawful appropriation.  Although the Supreme Court has from time to time delayed the effective date of its judgments, authorizing expenditures that it has decided are illegal is quite another matter.

But the possibility of a brief reprieve from a death sentence for the federally facilitated exchanges in 34 states raises profound practical problems as well.  Presumably the idea is that this would give states time to establish exchanges of their own.  A Supreme Court decision is unlikely, however, to come down until late June. Federal regulations require states to give the federal government six and a half months’ notice before switching from a federally facilitated to a state exchange, and current guidance would require states to notify the federal government by May 1 if they wanted to operate their own exchange by January 1, 2016. 

Moreover, by late June, legislatures in most states will no longer be in session, while in a number of states governors are legally prohibited from establishing exchanges without permission from the legislature. Federal establishment grants, which proved vital to helping states that currently operate exchanges to establish them, are no longer available as of 2015.  Also as of 2015, state exchanges must be self-supporting, without federal operating support.  Finally, in many, probably most, Republican states, neither the legislature nor governor is politically open to setting up a state exchange. 

Insurers will also find a reprieve of a few months unhelpful.  Under federal rules, insurers must file their 2016 rates by May 15, 2015.  In some states insurers may have up until August to revise their 2016 rates, but a Court decision in late June is simply not going to allow enough time for insurers to set rates for 2016 and for states to approve them.  With the great likelihood that premium tax credits will no longer be available in 34 states as of January 1, insurers would likely forego exchange participation for 2016 and, where they can, raise their rates drastically in the individual market outside the exchange.

Of course, Congress could always take action to fix the problem, but as the Solicitor General asked at the oral argument, “This Congress?” (followed by laughter).  There is no escaping the fact that a decision for the plaintiffs will be a disaster—for lower and moderate income Americans who depend on premium tax credits, for Americans who purchase insurance in the individual market where premiums would increase dramatically, for insurers, and for health care providers.  No one should be under any illusion that a brief delay in the effective date of the Court’s decision can in any way ameliorate that disaster. 
Timothy S. Jost is Robert L. Willett Family Professor of Law at Washington and Lee School of Law. You can reach him by e-mail at JostT at

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