Sometime this month the U.S. Supreme Court should rule in King v. Burwell - the latest Republican lawsuit seeking to damage the ACA, or "Obamacare." In King, Plaintiffs argue that an ambiguous sentence in the statute should be read to preclude insurance subsidies to any individual residing in a state that failed to establish its own insurance exchange and instead relied on the ACA's federal exchange. Although meritless on its face, as I wrote before, the King case - and a Republican majority on the Supreme Court - present a significant threat to Obamacare. Still, there is an important aspect missing in most press coverage of the King case.
Press coverage rightly reports that an adverse ruling in King could eliminate health insurance subsidies for approximately 8 to 9 million people in 34 states. Absurdly, most press outlets pretend that Republicans are debating some sort of a "fix" to the law should Republicans succeed in eliminating such subsidies as part of their own lawsuit. That - charitably - is a dumb fiction that the press inexplicably feels the need to engage in. (Even Republicans openly admit that they are not working on a plan to undo their own objective.)
But general press coverage is correct that an adverse King ruling will disproportionately remove insurance subsidies from individuals living in Red states. Applying a questionably applicable notion of "common sense," that leads many to conclude that Republicans will find themselves under intense political pressure to undo the ensuing damage.
While I think there may be some truth to this - that, as to individual subsidies, some Republicans may find themselves like the proverbial "dog who caught the car" - this typical political analysis ignores the central political goal behind this lawsuit: the King case was motivated from its inception as an attack on the "employer mandate," and any ensuing political fight will likewise center on elimination of the "employer mandate."
Briefly: the ACA's "employer mandate" (not fully effective until 2016) requires employers with more than 50 full time employees (defined as 30 hours a week or more) to provide their employees with mandated health insurance coverage or pay an increasing penalty per employee. But . . . the "employer mandate" only applies "if one or more of those employees 'enroll...in a qualified health plan with respect to which an applicable tax credit... is allowed or paid with respect to the employee.'" Get that? If Republicans prevail in King, then a Republican state that refuses to set up an exchange also eliminates any eligibility for individual subsidies (the "tax credit"), and that in turn effectively repeals the "employer mandate" in that state. If no employee in the state is eligible for an ACA subsidy, then the "employer mandate" also will not apply (with some complications for employers who draw employees across state lines). A fuller explanation of the legal issues is provided here by Prof. Terry Connelly, who complains:
And yet the media and even the most ardent supporters of Obamacare seem to ignore this potential effect. Assuredly, the "large employers" and their lobbyists who are funding the Halbig and King cases have not. Not to mix too many metaphors, but it is most important to understand that both the King and the Halbig cases are twin Trojan Horses: ostensibly about killing ObamaCare subsidies, but really all about indirectly but effectively destroying the individual and employer mandate.
The goal of eliminating the "employer mandate" was openly acknowledged and argued in the lower court proceedings, and continues to be openly promoted by groups
like the Heritage Foundation. Indeed, anti-ACA advocate Michael F. Cannon of the Cato Institute in a Forbes Op-Ed titled
"King v. Burwell Would Free More Than 57 Million Americans From The ACA's Individual and Employer Mandates" - ironically like his opponent Prof. Connelly - also chastises the press for ignoring that the purpose of the
King case is to eliminate the "employer mandate":
[T]hese reports and the ensuing media coverage uniformly neglect to mention that a victory for the Halbig plaintiffs would free not only those plaintiffs but tens of millions of Americans from the PPACA’s individual and employer mandates. Indeed, Halbig would free from potential illegal taxation more than ten times as many people as lose an illegal subsidy.
Now, elimination of the "individual mandate" would be a dream goal of Republicans because the viability of Obamacare
arguably depends upon it. But the
King case does not so neatly implicate the individual mandate, the Democrats would go to war over the individual mandate because of its consequences, and eliminating the individual mandate would equally harm rich and powerful interests like the insurance, hospital and pharmaceutical industries.
But the "employer mandate"? That is more in the nature of a "benefit," an employee protection, and a redistributive policy victory in the continuing fight between labor and capital. How important is the elimination of the "employer mandate" to Republicans? Mr. Cannon
explains:
Halbig [recaptioned as King] Would Free 250,000 Firms and 57 Million Employees from the Employer Mandate
In the 36 states with federal Exchanges, a Halbig victory would free — not “exempt” — all employers with more than 50 workers from the employer-mandate penalties to which the Obama administration is unlawfully subjecting them. Census Bureau data indicate that in all, more than 250,000 firms and 57 million workers could be freed from those unlawful taxes. That’s more than the population of 27 states. Table 3 shows the number of firms and employees in each of the 36 states with federal Exchanges. In Florida, a Halbig victory would free more than 16,000 firms and 5.1 million employees from the employer mandate. In Texas, it would free more than 24,000 firms and nearly 7 million employees from the employer mandate.
Those are big numbers, and we are also talking about whether the so-called "makers"
choose to provide health insurance or are
required to do so. Moreover, according to the thinking of advocates like Mr. Cannon, an "adverse"
King ruling would not result in pressure on Republicans to "fix" or embrace the ACA, but to the contrary would pressure the Democratic/Blue states to drop the ACA and its "employer mandate" to maintain economic competitiveness with Southern based companies not required to provide employee health insurance:
A [King] victory would not directly affect subsidies for Exchange enrollees in the 14 states (plus D.C.) that established their own Exchanges. But it would create pressure for those states to switch to a federal Exchange. Such a ruling would (finally) give those states’ officials the power to exempt large employers in the state from the PPACA’s employer mandate. . . .
[S]tate officials would also feel pressure to make the switch in order to maintain their tax bases. The employer mandate increases the cost of doing business. States where the employer mandate is operative would therefore be at a disadvantage when competing for employers against states where it is inoperative. Establishing states might fail to attract new firms and could even see existing firms relocate to federal-Exchange states. That fear alone could spur a state to make the switch.
You cannot understand the politics behind the
King case if you ignore the Republican preoccupation with eliminating the "employer mandate." Sure, Republicans retain hope that a
King ruling could be fatally disruptive and chaotic for Obamacare overall. But, contrary to press coverage, Republicans are not blindly and naively stumbling into a political dilemma regarding individual subsidies or focused primarily on the individual mandate. The creation of a Solid-South/Red State region devoid of any employer requirement to provide health insurance was, and remains, the core purpose behind the
King lawsuit. And if Republicans win the
King litigation, and the political pressure to restore individual subsidies becomes untenable, you can expect a major battle to condition any "fix" on the repeal of the "employer mandate." After all, that repeal was what this fight was all about from the start . . .
Note: the policy pro's and con's of an employer mandate is the subject of a separate post. I favor it and think it is important since we did not go the "public option" route. And it probably surprises no cynic that Obama and the Democrats have long signaled a squishy commitment to defending the employer mandate. With King, Republicans hope (realistically) to achieve no "public option" and no "employer mandate." Bottom line: if you want to understand the political motivations behind, and likely fall out from, an adverse King decision, focus on the employer mandate.