Scott Pruitt, the attorney general of Oklahoma, published a response to Justice Kennedy in the Wall Street Journal following King v. Burwell oral arguments this week. Pruitt tried to counter Kennedy’s notion that the plaintiffs’ version of the Affordable Care Act would be unconstitutionally coercive on the states — but he unwittingly proved Kennedy’s point entirely.
Pruitt dismissed Kennedy’s federalism concerns as patronizing coddling of the states. “The states are not children that the federal government must paternalistically ‘protect’ from the consequences of their choices by rewriting statutes,” Pruitt maintained. “In our constitutional system, states are free to make decisions and bear the political consequences, good or bad, of those choices.”
Fair enough. But does Pruitt grasp the full consequences of a decision not to create an exchange if the ACA works as the King plaintiffs claim? Pruitt thinks Oklahoma made the following choice: “Declining to establish a state exchange allowed Oklahoma to voice its strong political opposition to the Affordable Care Act as a whole, as well as to make a statement that it wanted neither the large-employer mandate nor the individual mandate to have effect within its borders. That was the trade-off. Oklahoma declined the premium tax credits, but freed itself of those mandates, and that was a choice the state was happy to make.”
Pruitt’s calculus leaves out the biggest cost on the scale: near-guaranteed insurance market death spirals, brought on by a market bound by the ACA’s guaranteed-issue and community-rating regulations, but freed from its individual mandate. He leaves this out of his column for either of two reasons: he doesn’t know about it, or he knows the political fallout from trying to defend that impossible “choice.”
If he doesn’t realize the devastating implications of the plaintiffs’ theory for his state’s insurance industry, then Oklahoma’s decision wasn’t quite so clear-minded and informed, after all. This isn’t surprising. Though Pruitt now claims Oklahoma understood that it would lose out on subsidies, there’s no evidence that any state considered the prospect that it would lose insurance subsidies by declining to create an exchange — let alone that losing those subsidies would send its insurance market into a tailspin.
But if Oklahoma didn’t know these dire consequences, this runs right into another constitutional doctrine that cuts against the plaintiffs’ argument in King: the Pennhurst doctrine. The Constitution requires that the states have clear notice of the terms of federal conditional spending grants. Because states didn’t have sufficient notice of the consequences of declining to create an exchange, the Court should avoid an interpretation of the law that unconstitutionally imposes draconian consequences without providing the states with notice.
But perhaps Pruitt and Oklahoma do understand these consequences. If so, omitting prospective market death spirals from his response to Justice Kennedy is telling, for it all but concedes that accepting such grave devastation to Oklahoma’s insurance industry would be impossible to defend. Imagine a political figure having to explain to her state’s citizens that she induced complete dysfunction in the insurance industry and jeopardized the stability of their health insurance in order to defy President Obama.
Perhaps Pruitt can make a plausible case that missing out on millions of dollars in federal subsidies is worth it to escape the individual and employer mandates. But there’s no tenable way to justify accepting the resultant economic carnage that would occur if a state refused to create an exchange under the petitioners’ argument. Especially with healthcare and business stakeholders pleading with Red states to comply with Obamacare rather than tempt market chaos. (Remember when the ACA was supposed to be an economic killer?)
So Pruitt’s response to Justice Kennedy only serves to illustrate Kennedy’s very point. If one reckons with the full consequences of the plaintiffs’ version of the law, the consequences of snubbing the federal government are far too draconian to seriously entertain. By omitting the death spiral from his cost-benefit calculus for Oklahoma, Pruitt’s silence admits what the Supreme Court is catching on to: the plaintiffs’ version of the law is too coercive to embrace.