If the Supreme Court Breaks Obamacare, Will Republicans Fix It?

If the justices strike down the law’s subsidies, voters will demand a fix. But who in Congress is going to give?

Supporters of the Tea Party movement demonstrate outside the Capitol in Washington, DC, on March 20, 2010.
National Journal
Sam Baker and Sophie Novack
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Sam Baker Sophie Novack
Dec. 14, 2014, 2:34 p.m.

Re­pub­lic­ans want the Su­preme Court to blow a ma­jor hole in Obama­care next year, but they are still de­bat­ing wheth­er they would help re­pair it—and what they should ask for in re­turn.

There’s a very real chance the high court will in­val­id­ate Obama­care’s in­sur­ance sub­sidies in most of the coun­try, which would be dev­ast­at­ing for the health care law. It would be­come al­most en­tirely un­work­able in most states, and the cost of cov­er­age would skyrock­et.

That loss for the Af­ford­able Care Act might seem like a clear-cut polit­ic­al win for the GOP, but the real­ity would be far messi­er.

Such a rul­ing would weak­en the law’s in­di­vidu­al man­date and make cov­er­age un­af­ford­able for mil­lions of people. And be­cause many of those people live in Re­pub­lic­an-run states or 2016 battle­grounds, they’ll be ask­ing for a solu­tion.

That would leave Re­pub­lic­ans with a dif­fi­cult choice: Do they con­tin­ue to push for an all-out re­peal of the law—cre­at­ing a stan­doff with Demo­crats who will dig in in the hopes of le­gis­la­tion un­do­ing the Su­preme Court’s de­cision—or do they seek a deal that al­le­vi­ates the law’s bur­den on those who’ve lost their sub­sidies? Such a deal would likely in­clude pull­backs of ma­jor parts of the law, but it would also re­quire Re­pub­lic­ans to give up on a full “root-and-branch” re­peal.

A rul­ing isn’t ex­pec­ted un­til June. Key GOP law­makers are just be­gin­ning to weigh their op­tions if the Court does in­val­id­ate the law’s sub­sidies. Those con­ver­sa­tions are still pre­lim­in­ary, and the party hasn’t settled on a strategy yet. “I’ve had a lot of con­ver­sa­tions about it,” said Sen. Or­rin Hatch, who will soon take over as the chair­man of the power­ful Fin­ance Com­mit­tee. “I’m just in the be­gin­ning [stages] of that.”

But by the sum­mer, both parties will need a plan. “We’ve got to con­sider everything, from a sub­sti­tu­tion for the bill to amend­ing the bill to work­ing with Pres­id­ent Obama to try to get him to work in good faith with us,” Hatch said.

The case be­fore the Su­preme Court ar­gues that sub­sidies should not be avail­able to people who live in states that didn’t set up their own ex­changes. At least for now, that’s 36 states. If the chal­lenge suc­ceeds, cov­er­age would be­come un­af­ford­able for as many as 99 per­cent of en­rollees in those states, ac­cord­ing to a court brief from lib­er­al eco­nom­ists. Some 4 to 5 mil­lion people would likely drop their cov­er­age.

States that rely on the fed­er­al gov­ern­ment to run their ex­changes would also see new tur­moil in their in­sur­ance mar­kets. The sub­sidies that make cov­er­age af­ford­able would dis­ap­pear, and most people who lost their sub­sidies would be­come ex­empt from the in­di­vidu­al man­date—but new rules re­quir­ing in­surers to cov­er people with preex­ist­ing con­di­tions would re­main on the books. In­surers would be stuck with only the sick­est cus­tom­ers, and the in­sur­ance “death spir­al” Obama­care strained so hard to avoid would be­come a real pos­sib­il­ity.

And again, that would all hap­pen only in states that re­fused to set up their own in­sur­ance ex­changes—just about every red state in the coun­try. In big, solidly Demo­crat­ic states like Cali­for­nia, Mary­land, and New York, Obama­care would still work ba­sic­ally the same, and res­id­ents would still get fin­an­cial help to cov­er their premi­ums.

That double stand­ard, along with dra­mat­ic price in­creases and cov­er­age losses in 2016 battle­grounds like Flor­ida, North Car­o­lina, and Ohio, would likely make the new status quo un­sus­tain­able both sub­stant­ively and polit­ic­ally. Do­ing noth­ing may not be an op­tion.

The ques­tion for Re­pub­lic­ans, who will con­trol both the House and Sen­ate next year, is wheth­er they can muster a polit­ic­al con­sensus to clean up the mess the Su­preme Court might cre­ate—and what such a solu­tion would look like.

The easi­est op­tion would simply be a small edit to the Af­ford­able Care Act, to en­sure that sub­sidies are avail­able na­tion­wide. The Su­preme Court chal­lenge cen­ters on one phrase—a ref­er­ence to sub­sidies be­ing avail­able in “an ex­change es­tab­lished by the State.” Con­gress could eas­ily add the words “or the fed­er­al gov­ern­ment” and this would all go away.

But that might be too simple for Re­pub­lic­ans, es­pe­cially con­ser­vat­ives and pres­id­en­tial con­tenders who would re­coil at giv­ing the Obama ad­min­is­tra­tion such an easy out. “Some will say, ‘Well, all you gotta do is just file a little bill to let the fed­er­al ex­changes handle mat­ters, too.’ That flies in the face of what many, many be­lieve is an un­con­sti­tu­tion­al ap­proach to health care. It could be simply fixed, ex­cept it doesn’t fix the bill as a whole,” Hatch said Thursday.

Hatch said he had dis­cussed the is­sue that morn­ing with Sen. Lamar Al­ex­an­der, the in­com­ing chair­man of the Sen­ate Health, Edu­ca­tion, Labor, and Pen­sions Com­mit­tee. Hatch and Al­ex­an­der’s com­mit­tees would have the primary re­spons­ib­il­ity for writ­ing a po­ten­tial fix.

A more pal­at­able ap­proach could be to re­store at least some of the law’s sub­sidies in ex­change for oth­er changes. “Deal­ing with the sub­sidy is­sue may give us a chance to deal with a lot of oth­er things”¦. You might want to fix that, but at the same time you fix that, you might want to do a lot of oth­er things that need to be done to Obama­care,” Sen. Chuck Grass­ley said.

The scope of those changes could vary wildly, from simple horse-trad­ing on pro­vi­sions like the med­ic­al-device tax and em­ploy­er man­date to a more ag­gress­ive re­struc­tur­ing of the law’s be­ne­fit struc­ture.

“A lot de­pends on wheth­er we’d have pres­id­en­tial help on it. I can see some mod­est changes, but it will not solve the myri­ad prob­lems with Obama­care,” Hatch said. I can see a sub­sti­tute that would be a bill that really would work and save money and bring the best health care to people.”

Con­ser­vat­ive eco­nom­ist Douglas Holtz-Eakin, a former Con­gres­sion­al Budget Of­fice dir­ect­or, said he could see Con­gress restor­ing the full sub­sidies for one or two years, while law­makers fig­ure out a new struc­ture for fin­an­cial as­sist­ance—something more along the lines of the health care pro­pos­al from Hatch and Sens. Richard Burr and Tom Coburn.

But even in ex­change for oth­er Obama­care con­ces­sions, Holtz-Eakin said he doubts that a GOP-led Con­gress would per­man­ently re­store Obama­care’s sub­sidies in full. “I think Re­pub­lic­ans know the cur­rent sub­sidy struc­ture is too rich “¦ they can’t lock that in per­man­ently,” he said.

If Con­gress doesn’t act, or can’t reach an agree­ment with the White House, each state would have to come up with its own solu­tion—an ex­tremely dif­fi­cult task.

The states that haven’t set up ex­changes yet might not be able to set up a mar­ket­place in time for next year’s en­roll­ment peri­od, and would not be able to take ad­vant­age of the fed­er­al grants that helped es­tab­lish the first state-run ex­changes. And those obstacles only come in­to play if gov­ernors and state le­gis­lat­ors can agree to move for­ward on an ex­change.

“If the [sub­sidies are] in­val­id­ated—and ab­sent ef­fect­ive con­tin­gency plan­ning—a state that has de­clined to cre­ate its own ex­change prob­ably won’t be able to stave off the im­me­di­ate destabil­iz­a­tion of its in­sur­ance mar­ket,” Uni­versity of Michigan law pro­fess­or Nich­olas Bagley wrote this week in The New Eng­land Journ­al of Medi­cine.

For now, Re­pub­lic­an plans for a pos­sible Con­gres­sion­al fix re­main vague, and a solu­tion that re­lies on pop­u­lar “re­peal and re­place” talk­ing points aren’t likely to fly with the ad­min­is­tra­tion.

“I’ve already been in dis­cus­sions with House lead­er­ship to ad­dress the House plan should the out­come be that way,” Rep. Cory Gard­ner said. “We want to make sure people have op­por­tun­it­ies for qual­ity health care and qual­ity in­sur­ance—af­ford­able in­sur­ance—and that would be part of the Re­pub­lic­an plan, should that be [the court out­come].”

“Re­peal­ing and re­pla­cing the law is a good idea, we should do that today,” he said.

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