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Obamacare’s Biggest Threat

Now that this year’s elections are over many people are wondering about the fate of the Affordable Care Act also known as “Obamacare.”  Although many Republicans ran on a promise to repeal Obamacare, they may not pose the biggest threat to the law’s future.   Last Friday (11/7) the Supreme Court announced that the Court would consider the arguments in King vs Burwell on the legality of providing premium tax credits for health plans purchased through the Federal Marketplace.

This case and others make a fairly simple argument.  Sec 1311 of the ACA provides, among other things, for the establishment of Exchanges by the individual states; however, in the event that a State does not establish it’s own Exchange, Sec 1321 directs the Federal Government to do so instead.  Section 1401 of the ACA amends the tax code creating a new Section 36B which, among other things, creates tax credits for qualified persons “enrolled in through an Exchange established by the State under 1311…”

The question is whether this was the intent of Congress and what will the court do about it.  The legislation was intended to entice states to establish their own exchanges; however, relatively few ended up doing so.  Locally, Arkansas & Kentucky established their own exchanges while Tennessee & Mississippi did not.

KFF Map of State based & Federally-faciliitated Marketplaces

If the Supreme Court rules in favor of the Plaintiffs, the decision will effectively unravel the law in more than half of the states.   The reason is that the employer mandate is enforced by penalties placed on large employers for non-compliance.  The penalties are triggered when a person gets a subsidy on an Exchange.  If no one in a State is eligible for a premium tax credit, then large employers cannot be fined for non-compliance thus the law effectively collapses.

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