Obamacare, Back at the Supreme Court: Frequently Asked Questions

By MARGOT SANGER-KATZ FEB. 3, 2015

This spring, the Supreme Court will rule in a case that could devastate Obamacare's health insurance expansion. Here's The Upshot's guide to the King v. Burwell case.

Why is the King v. Burwell case important?

Big stakes—both human and political.

What is the case about?

Who gets federal subsidies to help pay for health insurance

How is the court likely to rule?

It's a close call.

Who could lose subsidies?

Six million people immediately. Up to 10 million over time.

Would other people be affected too?

Yes, a decision for the plaintiffs could disrupt insurance markets.

What are the two sides' arguments?

They disagree on the meaning of one phrase in the health law.

If the plaintiffs win, what will the Obama administration do?

Make it as easy as possible for states to establish exchanges.

Why would Republicans want to help save the subsidies?

It could help them obtain other concesssions on the health law.

How is this case different from the 2012 Obamacare case?

It’s narrower, but still significant.

Which states are most likely to respond?

A few are close to running their own exchanges.

Who is bringing this case?

Four individuals, backed by an advocacy organization.

When will the case be decided?

Probably in June.

: Why is the King v. Burwell case important? ↖ Back to top

The case is one of this year's most important news subjects. It has the potential to roll back a major portion of Obamacare — the subsidies that some 6 million middle-income people, across more than 30 states, now receive to buy health insurance. Without those subsidies, many people would not be able to afford health insurance. And without those people in the insurance markets, prices are likely to rise for everyone else. A victory for the plaintiffs would represent a major blow to the health law.

: What is the case about? ↖ Back to top

The Affordable Care Act — the official name for the heath law — sets up marketplaces in every state where people who don’t have insurance can shop for individual health plans. Most blue states set up their own marketplaces, known as exchanges. Most red states did not, instead allowing the federal government to do so. Across all states, about 85 percent of customers qualify for federal subsidies to help pay for the coverage, based on their income.

One section of the law says that subsidies should flow to customers. Plaintiffs argue that language means that only people in the state-run marketplaces--and not those in federally run marketplaces--can get the subsidies.

: How is the court likely to rule? ↖ Back to top

The fact that the court agreed to hear the case suggests that at least four justices are already giving serious consideration to rolling back those subsidies. (For the court to hear a case, four justices must vote to accept it.)

Legal experts assume that the four justices appointed by Democratic presidents will all rule for the government; the question is whether any of the five appointed by Republicans will join them and preserve the subsidies. In 2012, Chief Justice John Roberts sided with the four Democratic appointees and ruled the health-care law constitutional. He — along with Associate Justice Anthony Kennedy — remains the Republican appointee most likely to side with them again this time.

: Who could lose subsidies? ↖ Back to top

Precise answers are hard, because exchanges take several forms – not simply federal- or state-based -- and both the Court and the federal government may have leeway in defining what it means for an exchange to be “established by the state.” But the subsidies could disappear in as many as 37 states, meaning about 6.2 million people would most likely lose their tax credits.

A decision for the plaintiffs would probably cancel the subsidies for a majority of people nationwide with exchange plans so far. And more people are expected to sign up for coverage through the exchanges in the next few years, so the current estimates undercount the long-term effect of a ruling. Those affected would be predominantly white, Southern, employed and middle-aged.

: Would other people be affected too? ↖ Back to top

Beyond the immediate cancellation of subsidies, a decision for the plaintiffs would also have secondary effects on insurance markets. As subsidies disappear and most lower-income customers drop out of the market, only the sickest such patients are likely to keep paying for insurance. That, in turn, will lead to higher prices for everyone, pricing out even people who don't now need subsidies.

A recent analysis suggests that 1.4 million people who could otherwise pay their whole premium themselves might lose coverage because they would no longer be able to afford it.

: What are the two sides' arguments? ↖ Back to top

The plaintiffs argue that the clear language in one section of the law means that only residents of state-run exchanges are allowed to receive subsidies. The exchanges being managed by the federal government, they say, do not count as “established by the state” under the law.

The Obama administration says that the phrase is a term of art, which Congress intended to mean both state and federally run marketplaces. They further argue that many other parts of the law suggest that Congress intended the money to go to people in every state. And there is a long history of courts ruling that, if Congress says something confusing, then interpreting the law falls to regulators and not courts.

: If the plaintiffs win, what will the Obama administration do? ↖ Back to top

Obama administration officials are keeping mum about any possible contingency planning around the case. But if the court rules for the plaintiffs, the administration will most likely do everything it can to help states that haven’t yet established their own exchanges do so. Possibilities include loosening requirements for what states must do to get an exchange approved and shifting deadlines to make the process more flexible. Whatever the administration does, it won’t be easy for states to set up exchanges quickly.

The broadest solution would involve working with Congress on a legislative solution. A relatively simple change to the law — changing just one phrase — would remove the legal doubt around the case. Of course, most of these responses require cooperation from Republicans, in states or in Congress.

: Why would Republicans want to help save the subsidies? ↖ Back to top

Many Republicans have fought the law at every turn and still favor repealing it. It's possible that Republicans in Congress and in states would prefer to let the law shrivel than to address any issues created by a Court decision.

But some legal experts think cooperation isn't out of the question. Republican politicians may be sensitive to a situation in which millions of their constituents lose their health insurance coverage. And some Obamacare opponents recognize that the resulting crisis might create an opportunity for negotiation with the White House, which has vowed to veto most major legislative changes to the health law. It's likely that insurers, fearing a breakdown in the marketplace, will lobby for a fix.

: How is this case different from the 2012 Obamacare case? ↖ Back to top

The first case focused on constitutional challenges: particularly, whether Congress could require people to buy insurance or pay a penalty. The court ruled 5-4 that Congress could. The King case concerns a more technical legal question of how to interpret the law.

Another major difference is that the King challenge is focused only on the question of premium subsidies. A ruling against the government would have substantial effects. But it would not risk overturning the Affordable Care Act in its entirety. The Medicaid expansions in many states would stand, as would regulations of insurance company profits, changes to Medicare payments, requirements that chain restaurants publish calorie counts, and the requirement that young adults be offered coverage on their parents’ policies, among many other provisions of the complex law.

: Which states are most likely to respond? ↖ Back to top

The states using the federal exchange are not uniform in their opposition to Obamacare. Eleven of the states that could be affected have gone so far as to ask the Supreme Court to preserve the subsidies. Seven states, including Illinois and Arkansas, are currently splitting management duties with the federal government, in a kind of partnership. If subsidies were at stake, those states might be more likely to take over the rest of exchange management, though it would take a lot of work.

There are also three states, Nevada, New Mexico and Oregon, that planned to run their own exchanges, but then switched to parts of the federal system after their computer systems failed. They could potentially try to fix those systems to keep their subsidies
Of course, many other states have shown little enthusiasm for exchange-building. Some big states, including Florida and Texas, are in this category. Seven states, including North Carolina and Missouri, have even passed laws preventing their governors from pursuing exchange-building activities.

: Who is bringing this case? ↖ Back to top

Four individuals — David King, Douglas Hurst, Brenda Levy and Rose Luck — are suing to challenge the federal government’s offer of subsidies to them. All four live in Virginia, a state that did not set up its own exchange. The plaintiffs object to a provision of the law that requires everyone who can afford insurance to obtain it or pay a tax penalty. If subsidies in Virginia were cut off, the plaintiffs would no longer be required to buy coverage because it would no longer be considered affordable under the law.

They are not the only people to challenge the law — cases in other states were brought by people with similar circumstances — but theirs is the one the Supreme Court took. The case has been funded by an organization called the Competitive Enterprise Institute. The lead lawyer on the case, Michael Carvin, from the law firm Jones Day, also worked on the 2012 challenge to the Affordable Care Act. The Obama administration defendants — including Sylvia Mathews Burwell, Mr. Obama’s Secretary of Health and Human Services — are represented by the Justice Department.

: When will the case be decided? ↖ Back to top

The Supreme Court has agreed to hear oral arguments on the case on March 4, which means it won’t rule before then. Typically, the Court announces its opinions in its biggest cases at the very end of its term, in late June. There’s no hard and fast rule that it has to save this case for last, but given the intense public interest, it is likely to be one of the final decisions of the term. 

In the meantime, both sides in the case, and many interested outside parties, will be filing written briefs with the courts. The website SCOTUSblog is compiling them.

Correction: February 3, 2015
An earlier version of this article misstated the source of funding for lawsuits  challenging the Affordable Care Act’s rules on subsidies. Two of  them, including King v. Burwell, have been funded by the Competitive Enterprise Institute; the institute has not funded all such cases.