What’s Next for Obamacare After King v. Burwell

Published May 7, 2015

When the U.S. Supreme Court determines the outcome of King v. Burwell this summer, it will probably strike down Obamacare benefits in 36 states because the Obama administration did not follow its own law passed by congressional Democrats and signed by President Barack Obama.

The law provides for federal benefits to help pay for health insurance purchased “through an Exchange established by the State,” but only 14 states set up their own health care exchanges. In the other 36 states, the exchanges were established by the Department of Health and Human Services (HHS).

The law establishing Obamacare, the Patient Protection and Affordable Care Act (ACA), pointedly leaves out any mention of federal benefits for health insurance when it discusses exchanges established by HHS. The architects of Obamacare have already publicly explained the law was written in this way to provide irresistible incentives for states to establish exchanges so their residents could get Obamacare benefits. Obamacare specifically defines “State” as “each of the 50 states, plus the District of Columbia.” There is no mention of HHS.

But not to worry, Obama simply ordered the Internal Revenue Service to issue a regulation that Obamacare health insurance subsidies, which are in the form of tax credits, would be provided for health insurance purchased on either exchanges established by the states or by HHS, a clear violation of the law.

In response, four individuals from Virginia who claim they are harmed by this regulation because it makes them subject to Obamacare’s individual mandate, which requires people to enroll in comprehensive healthcare coverage or pay a tax penalty, sued. The plaintiffs are asking the courts to strike down this HHS regulation as contrary to explicit passages of the law.

Repealing State Exchanges

There are still at least five justices on the Supreme Court (SCOTUS) that recognize the purpose of the federal courts is to enforce the law as written and that Congress must approve any changes in federal statutes, so it’s likely SCOTUS will rule in favor of the plaintiffs.

Another provision of ACA where Obamacare health insurance benefits do not apply is the counterproductive individual and employer mandates. When the Supreme Court strikes down Obamacare health insurance subsidies in 36 states, the individual and employer mandates will be removed from those states as well.

Democrats and their party-controlled members of the media will then surely pressure the prevailing Republican governors and state legislatures to establish state exchanges so citizens in their states can get the Obamacare benefits their taxes are paying for. They will also pressure congressional Republican majorities to reestablish Obamacare in all 50 states.

But Republicans must not betray their own voters.

Republican governors and state legislatures should exclaim relief the job-killing and cost-increasing individual and employer mandates no longer apply in their states. Republicans should also pressure Democrat governors and legislators to repeal the state exchanges in the 14 states that have them.

Letting States Opt Out

Since states without state exchanges will have opted out of the Obamacare benefits, Republicans in Congress should pass legislation providing the citizens of those states who have opted out of Obamacare tax credits. The new federal legislation should also repeal all of the Obamacare regulations in states without state exchanges.

The key implication here is all the Obamacare increases in the cost of health insurance will be reversed, and without those Obamacare cost increases, the Obamacare health insurance subsidies will no longer be necessary.

Block Grants Needed

Block grants should also be established in any legislation that is designed to replace Obamacare.  Block granting Medicaid to the states, as was the case with the 1996 welfare reforms, would allow state governments to use their resulting new control over Medicaid to provide benefits in the form of health insurance vouchers impoverished Americans could use to help buy their own health insurance, including health savings accounts.

This would vastly improve health care for the poor, who cannot get timely, essential health care through Medicaid because the government so badly underfunds payments to doctors and hospitals that accept Medicaid patients.

This isn’t a problem in a truly free market because private insurers must adequately compensate doctors and hospitals to attract health insurance customers.

Sure, Obama could veto such a post-King v. Burwell fix for his broken Obamacare disaster, but he and his cronies would then have to live with a crashed health care system for another year, when another president will be elected.

An Obama veto would further clarify what is at stake in that election.

Peter Ferrara ([email protected]) is a senior fellow in entitlement and budget policy at The Heartland Institute. He previously served in the White House Office of Policy Development under President Ronald Reagan and as associate deputy attorney general of the United States under President George H. W. Bush. He is the author of Power to the People: The New Road to Freedom and Prosperity for the Poor, Seniors, and Those Most in Need of the World’s Best Health Care.