Administration: No backup plan for uninsured if health care tax credit case loses
The Obama administration said Tuesday that it will offer no policy alternatives if the Supreme Court rules that federal tax credits used to purchase marketplace health insurance can only be offered in states that operate their own exchanges.
Tuesday’s announcement by Health and Human Services Secretary Sylvia Burwell means a high court decision in favor of the plaintiffs in the upcoming King v. Burwell case would strike a crippling blow to the Affordable Care Act, President Obama’s legacy-defining health care law.
An administration defeat would cause an estimated 9.3 million people in the 34 states that use the federal HealthCare.gov website to lose their tax credits, according to estimates by the Urban Institute, a liberal think tank. Some 67 percent, or 6.3 million of these consumers, would ultimately become uninsured.
And enrollment in individual coverage purchased outside the workplace would fall by 9.8 million people, or 69 percent, the Urban Institute estimates.
Burwell, in a letter to Senate Health, Education, Labor and Pensions Committee Chairman Orrin Hatch, R-Utah, said the administration’s hands were tied.
“We know of no administrative actions that could, and therefore we have no plans that would, undo the massive damage to our health care system that would be caused by an adverse decision,” Burwell wrote.
Burwell is scheduled to testify Thursday on Capitol Hill.
Oral arguments are set to begin March 4 in the King v. Burwell case. The plaintiffs argue that the law prohibits payment of premium tax credits and cost-sharing reductions to consumers in states that haven’t set up their own insurance marketplaces.
Only 16 states and the District of Columbia have established their own exchanges.
Plaintiffs cite a section of the health care law that says the tax credits can only be applied to coverage purchased “through an exchange established by the state.”
“Fidelity to text is the foundation of the rule of law,” Hatch said Monday during a presentation at the conservative Heritage Foundation. “Ultimately, I believe the Supreme Court is going to side with us.”
The Obama administration maintains that other aspects of the law make clear that Congress intended to provide the tax credits in all states. The Internal Revenue Service, therefore, used a broad interpretation of the law to authorize the subsidy for insurance purchased on both the state and federal health exchanges.
But Burwell acknowledged the severe damage that a decision against the administration would cause.
“First, millions of people would lose their health insurance subsidies and therefore would no longer be able to afford health insurance; second, without tax subsidies healthy individuals would be far less likely to purchase health insurance, leaving a disproportionate number of sick individuals in the (non-group) market, which would raise the costs for everyone else; and, third, states that did not establish a state marketplace would return to a time when the recourse for those without insurance was to seek care in hospital emergency rooms, further driving up insurance costs for everyone,” Burwell wrote.
That scenario, known as a “death spiral,” would ultimately doom the Affordable Care Act’s ambitious overhaul of the individual insurance market.
This story was originally published February 24, 2015 at 7:18 PM with the headline "Administration: No backup plan for uninsured if health care tax credit case loses."