Opponents of the Affordable Care Act were hoping for a legal smackdown before the end of the year. Instead, they got an unwelcome dose of reality, as the U.S. Supreme Court today declined to hear a case whose outcome could significantly undermine key components of the health-care law.
On November 3, SCOTUS chose to leave the case, King v. Burwell, off its list of new cases--but "relisted" it for the Supreme Court's next private conference, this Friday, with a decision on whether to accept the case likely to be announced on November 10. The relisting suggests that the justices are still thinking this one through, perhaps debating whether to take the case now, or wait for the outcome of a closely related case, Halbig v. Burwell, around the end of the year.
Both cases consider the same question: whether the Internal Revenue Service had the right to extend tax-credit subsidies to health coverage purchased through exchanges established by the federal government--or only to coverage purchased in state-established exchanges.
The actual language of the Affordable Care Act clearly states that only coverage purchased through an exchange "established by the state" can qualify for subsidies. Yet 36 states chose not to set up health-insurance exchanges, opting to let their residents buy coverage through the federal Healthcare.gov site instead. In May 2013, the IRS issued a clarifying rule, saying that people in these states could also qualify for subsidies. And indeed, in an op-ed in the Washington Post last week, five Democratic heads of the House and Senate committees that actually wrote the bill said that that the IRS interpretation is exactly what they intended.
But in July, the judges of two lower courts split on the issue: In the Fourth Circuit Court of Appeals, in Richmond, Virginia, a three-judge panel unanimously agreed with the IRS interpretation of the law, in King v. Burwell. On the same day, the D.C. Circuit Court decided 2-to-1 that the IRS overreached. Often, in cases in which district courts reach conflicting decisions, the Supreme Court will hear the case. But in September, the D.C. Circuit Court vacated its decision in Halbig v. Burwell and opted to rehear the case "en banc" before a full panel of the Circuit's judges. Oral arguments are scheduled for December 17. Until then, there is technically no conflicting decision for SCOTUS to resolve, which makes some law scholars think that the justices will continue to wait for the outcome of Halbig. On the other hand, because the case was relisted, rather than simply left off the docket, it has a better-than-average chance of getting heard by the court.
How does all this legal maneuvering affect you and your business? In the short term, not at all. If you're a business that will be impacted by the employer mandate in 2015, keep moving ahead with your plans to provide health coverage--or to pay the penalty for not doing so. But longer-term, if the Supreme Court hears either of these cases and decides that subsidies don't apply to federal exchanges, it would be a game changer. More than 4 million people who get subsidies through the federal exchange would lose them. And--because Obamacare's employer-mandate penalties are triggered only when employees qualify for subsidies--an estimated 250,000 larger employers could, if they wanted, drop employee health coverage and get away without paying any penalties.
That would be a big deal, indeed. You can find updates on the case at Scotusblog.com.