King v. Burwell is imminent. The resolution to the legal challenge to ObamaCare’s jugular is expected to arrive within a matter of days. We’ll soon know whether the Supreme Court will allow the anti-universal coverage crusaders to radically expand the federal government’s power to dragoon the states.
The petitioners in King argue that Congress sought to manipulate state behavior in an unprecedented way. Specifically, the petitioners argue that by passing ObamaCare, Congress posed the following choice to the states: establish an exchange and enjoy a fully functioning universal healthcare scheme, or decline to establish an exchange and endure deliberately imposed federal regulatory havoc on your insurance market.
The latter choice is implicit from the very structure of ObamaCare. The law’s insurance expansion is based on a system of consumer protections, individual mandates, and government subsidies. The consumer protections guarantee insurance coverage for the pre-existing sick. The mandate protects insurance markets from adverse selection by requiring people to buy into insurance risk pools preemptively rather than waiting until falling ill. And the subsidies allow individuals to afford private health insurance — a necessity to equitably impose a mandate.
The petitioners argue that Congress threatened to unravel this tripodic structure in states that rejected the option to create a health exchange. Under their theory, such states elected to forego subsidies. This triggers the affordability exemption to the individual mandate, releasing countless low- and middle-income people from the obligation to purchase insurance. This in turn would upend individual insurance markets in these states, destabilized by the relative healthy opting out of insurance risk pools.
We know how the story ends in this regulatory environment. States like New York, New Jersey, and Massachusetts have all tried this same untenable regulatory environment, and they each incurred moribund insurance markets, spiraling costs, and political frenzy as a result. By trying to legislate against insurance discrimination and medical underwriting without adopting costly subsidies and mandates, these states quickly saw their insurance markets seize up and their health premiums vault beyond the reach of consumers, sending their political leaders scrambling for a quick fix.
The only true fix was found in Massachusetts, where Governor Mitt Romney enacted a system of mandates and subsidies that ultimately became the model for ObamaCare. This shored up the insurance market while guaranteeing coverage for all.
The King petitioners posit that Congress threatened to impose the dismal fate of past futile efforts of the states on those that decline to create exchanges. Economic theory and historical practice show that this would wreck state insurance markets, plunging markets into death spirals and launching an insurer exodus.
Such a threat would seem to be plainly at odds with Supreme Court precedent. Our federalist system prevents the federal government from coercing the states to enact its preferred policies. Threatening to decimate insurance markets via regulation if the states decline to enact a federal program would seem to be precisely such an illicit threat.
That’s why the Supreme Court ought to avoid this loaded interpretation that the petitioners propose in King in favor of the government’s reasonable, utterly unproblematic reading of the law. Under the government’s reading, the Affordable Care Act authorized the Department of Health and Human Services to create “such exchange” in any state that elected not to create its own — and that “such exchange” meant an exchange that could pay out insurance subsidies.
At oral arguments in King, at least two justices — Justice Sotomayor and Justice Kennedy — seemed drawn to this reasoning. They worried about the coercive implications of the cramped statutory reading that the petitioners put forth.
And earlier this month, the Court denied cert in another ObamaCare case, signaling that it would not be redefining its coercion jurisprudence this term. This is good news for the law’s supporters. For the Court to endorse the petitioners’ position in King, the Court would have to confront coercion head-on and explain how the coercion here is different from that under the NFIB Medicaid expansion. And the Court can still use coercion in a constitutional avoidance context in King without creating new precedent.
The Supreme Court has long romanticized the idea that the states are laboratories of democracy, testing out policy experiments on a small scale to see which are ready to go national. Indeed, ObamaCare very much fit this mold, picking up Massachusetts’s successful health reform as the model for national reform.
Entirely novel, however, would be a statutory structure that cast Congress in the role of evil scientist, resurrecting the failed experiments of the states to bludgeon its way to getting its chosen policies enacted nationwide. Such a tactic would be a cynical perversion on traditional federalist principles. And ObamaCare supports ought to hope that the Supreme Court doesn’t allow it.