The Supreme Court will hear arguments next month in King v. Burwell, which challenges the legality of the Internal Revenue Service’s rule governing subsidies given to those who buy health-care coverage through the federal HealthCare.gov exchange. The Affordable Care Act, the plaintiffs say, allows only those who enroll in exchanges “established by the state” to qualify for subsidies.
That would disqualify millions of residents who have so far qualified for subsidies in the 34 states that have declined or failed to set up their own state exchanges. Supporters and critics of President Obama’s signature health-care law both agree that without those subsidies, the number of uninsured will spike as costs to individuals rise.
Governors of those 34 states, even the Republicans who oppose the Affordable Care Act, say they are concerned at the chaos that could ensue if the court rules the federal subsidies unconstitutional. While no solution is evident, they are using a meeting of the National Governors Association, happening this weekend at a Washington hotel, to discuss contingency plans.
“It has been the topic of the day. I mean it is what all governors are talking about,” said South Carolina Gov. Nikki Haley (R), who leads a state in which 172,000 people qualify for federal subsidies. “You’re going to hear the governors be very loud about this.”
Haley said her state legislature will begin debating a measure that would create a health-care marketplace in South Carolina this week. She said Congress should allow reciprocity across state lines, a plan Congressional Republicans have included as a key part of alternative proposals to the Affordable Care Act.
About 87 percent of those who live in the 34 states that opted not to create their own exchanges qualify for subsidies, according to the Department of Health and Human Services. The average subsidy is $268 a month, which lowers premiums by 72 percent. An Urban Institute study found that 61 percent of those who receive federal subsidies are non-Hispanic whites, and 62 percent live in the South. More than 80 percent work full or part-time.
Utah Gov. Gary Herbert (R) has already spoken to Senate Majority Leader Mitch McConnell and House Speaker John Boehner, he said in an interview. But, he added, there is uncertainty over what path the Supreme Court might choose to take — and whether their ultimate decision would take effect immediately.
“We’ve certainly talked with leadership in the House and the Senate about what may happen. Is the court going to give us some time? I expect that the courts will, they won’t make a decision without us having some kind of [grace period], to the end of the year, to make some adjustments,” Herbert said. More than 120,000 residents of his state qualify for federal subsidies.
Republican discomfort with the possible fallout from King v. Burwell is evident in court filings, or the lack thereof. While Republican governors have raced to challenge the Affordable Care Act in other facets, only seven states — Alabama, Georgia, Indiana, Nebraska, Oklahoma, South Carolina and West Virginia — have filed briefs arguing the federal subsidies are illegal.
Without the federal subsidies, states could choose to rush to implement their own marketplaces. But establishing those marketplaces have been challenging, even in states where the political will exists: Oregon, New Mexico and Nevada have all scrapped their own marketplaces and opted into the federal HealthCare.gov system after technical problems hindered sign-ups.
In other states, mostly those dominated by Republican legislatures and governors, the political will to create a state exchange — and, thus, to appear to opt in to Obamacare — doesn’t exist. Though hundreds of thousands of residents qualify for health-care subsidies in states like North Carolina, Florida, Tennessee, Wyoming and Utah, Republican-led legislatures have blocked or threatened to block governors’ attempts to expand Medicaid; taking the next step, to implement an exchange, would be politically unpalatable.
Republicans control the legislature or the governor’s mansion in 33 of the 34 states that opted not to pursue their own exchanges — the lone exception being Delaware. In those states, where the political will to create health-care exchanges does not exist, governors will put pressure on their Congressional delegations to pass a fix.
“I ruled out a state-based exchange when I became governor, and if the Supreme Court rules in favor of the plaintiffs, I think the right course of action would be for Congress to have in place legislation that would grant states the flexibility and the freedom to craft health-care solutions based on increased consumer choice, that allow states to in effect opt out and innovate,” said Mike Pence (R), the governor of Indiana, a state in which 194,000 people receive subsidies.
But Congressional action is unlikely. Though Republicans, such as Louisiana Gov. Bobby Jindal (R), Sens. Richard Burr (R-N.C.) and Orrin Hatch (R-Utah), and Rep. Fred Upton (R-Mich.), have proposed alternatives to the Affordable Care Act, achieving the 60 votes necessary to advance a bill in the Senate, where Democrats still have 46 votes, looms as a major hurdle. And the odds President Obama would sign anything that threatens his signature legislative accomplishment are slim, if not nonexistent.
“The governors are being impacted by two different branches of government right now, and they’re going to have to be the ones to implement” the outcome, said North Carolina Gov. Pat McCrory (R), who has delayed his own decision about whether to pursue a Medicaid expansion plan until the Supreme Court rules. “There’s no B plan by either the federal government or the states.”
— Niraj Chokshi and Lena Sun contributed to this story.