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Washington Letter: Supreme Court ponders Obamacare and insurance costs

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Catholic News Service

Several Supreme Court justices wondered aloud at oral arguments March 4 whether a ruling against the Affordable Care Act’s subsidies to millions of lower income Americans would lead to a “death spiral” for the health insurance program.

“We’re going to have the death spiral that this system was created to avoid,” said Justice Sonia Sotomayor, if the court were to rule in King v. Burwell against the practice of providing subsidies to some participants in insurance programs in states that failed to set up their own insurance exchanges and use the federal system.

Demonstrators gather outside the U.S. Supreme Court building in Washington March 4 as the justices inside hear oral arguments in a legal challenge to the federal Affordable Care Act. The court agreed to take a case challenging the federal subsidies that help people in 34 states pay for mandated health care coverage. (CNS photo/Jonathan Ernst, Reuters)
Demonstrators gather outside the U.S. Supreme Court building in Washington March 4 as the justices inside hear oral arguments in a legal challenge to the federal Affordable Care Act. The court agreed to take a case challenging the federal subsidies that help people in 34 states pay for mandated health care coverage. (CNS photo/Jonathan Ernst, Reuters)

The death spiral line of reasoning is one cited by the Catholic Health Association, among others, who argue in “amicus” or friend-of-the-court briefs that if the subsidies are withdrawn, millions of people will no longer be able to afford insurance and won’t buy it. Although they would then be subject to fines for not having coverage, the insurance industry itself would be forced to raise prices dramatically, because so many healthy people would no longer be in the risk pool. And uninsured poor people will go back to seeking treatment in the most expensive places, the brief added.

Because insurers are required to offer coverage to everyone, including those who are sick, the need to offset the cost of care with higher premiums would lead to an out-of-control spiral of costs, with fewer and fewer healthy people paying premiums, goes the argument for the broadest possible pool of people in the insurance market.

“States are obligated, insurers are obligated, to make sure that in their states, whether they’re part of this program or not, that they have guaranteed coverage, that children are covered ‘til they’re 26, that they base their costs on community ratings,” Sotomayor said to Michael Carvin, attorney for the plaintiffs who sued to stop the subsidies. If that happens, she continued, “costs are going to rise on every insurance plan offered in the country in those 34 states.”

Justice Anthony Kennedy seemed to see some validity to the point, telling Carvin that “there’s something very powerful to the point that if your argument is accepted the states are being told either create your own exchange or we’ll send your insurance market into a death spiral. … The cost of insurance will be sky-high.”

In a joint brief with Catholic Charities USA, the CHA pointed out that without subsidies, lower income individuals and families will be unable to buy insurance and will seek the only care available to them – “which often is expensive emergency care. In addition to being extremely costly, exclusively using emergency rooms is no substitute for regular treatment.”

“Patients, hospitals and the overstressed health care system will be hurt by a return to the old status quo,” said the Catholic organizations’ brief. The CHA represents more than 600 hospitals and 1,400 long-term care and other health facilities. Catholic Charities agencies provide a variety of services to more than 9 million poor people, including many who are coping with the lack of affordable health care.

The case itself may hinge entirely upon how the court interprets the intent of Congress in using the phrase “established by the state” to describe the conditions under which federal subsidies are provided in the ACA. But a portion of the oral argument revolved around the potential consequences of doing away with subsidies in the 34 states that relied on the federal government to run the exchanges by which people obtain insurance.

The lawsuit argues that federal subsidies in those states are improper because the exchanges were not technically “established by the state.” Supporters of how the system has been functioning argue that such an interpretation flies in the face of the obvious intent of Congress in writing the law.

Two justices who otherwise seemed inclined to rule that the subsidies are in fact illegal, Justices Antonin Scalia and Samuel Alito, talked about how to make sure there wasn’t a collapse of the health insurance system if they ruled that way.

Scalia said Congress would be quick to fix the problem.

“You really think Congress is just going to sit there while all of these disastrous consequences ensue?” he asked Solicitor General Don Verrilli, who argued on the government’s behalf. Scalia referred to other cases in which, after a far-reaching ruling “Congress adjusts, enacts a statute that takes care of the problem. It happens all the time. Why is that not going to happen here?”

Verrilli answered with a remark that drew laughter in the courtroom: “Well, this Congress, your honor, I, I … of course, theoretically they could.”

Scalia brushed aside the implication that the current Congress would be unable or unwilling to act.

“I don’t care what Congress you’re talking about,” he said. “If the consequences are as disastrous as you say, so many people without insurance and whatnot, yes, I think this Congress would act.”

In a teleconference the following day organized by Faith in Public Life, one member of Congress said he’s seen no indication that such a thing would happen.

Sen. Tim Kaine, D-Virginia, noted that Congressional Republicans have repeatedly tried to repeal the ACA, but have not put forward anything to replace it. He told Catholic News Service that in hearings on the topic, he has inquired what plans the Republican leadership has for their own health care substitute. His questions were met with “deafening silence,” he said.

During the oral arguments, Alito tested the waters for a ruling against the subsidy system but with a delay in how quickly the subsidies had to end.

Verrilli conceded that a delay in implementing such a court order would help, but not all that much.

As a practical matter, he said, the idea that many states would be able to, in perhaps six months, be able to establish exchanges and get them running so there is a seamless transition “I think is completely unrealistic.”

Another Catholic medical group that filed an “amicus” brief addressed exactly that question.

Trinity Health, which owns 86 hospitals and 128 other continuing care, home health and hospice programs in 21 states, addressed that issue in its brief.

It urged the court to rule against the petitioners, saying “millions of people will suffer serious harm, as will hospitals and the patients they care for, among others. There is no way to avoid that harm.”

However, the brief added, if the court does rule for the petitioners, “it should at least delay the damage by ensuring that the judgment avoids disrupting subsidies for this year’s insurance plans.”

Eliminating subsidies in the middle of the insurance year, “would be extraordinarily disruptive,” the brief said.