At some point in the next few weeks, the Supreme Court will rule on a lawsuit filed by conservative activists seeking to significantly curtail the Affordable Care Act. King v. Burwell takes aim at the tax credits provided by the ACA to low- and middle-income Americans when they buy health insurance through HealthCare.gov, the Web-based marketplace (or “exchange”) set up by the federal government.
The plaintiffs in King argue that a precise reading of the ACA prohibits the tax credits from being distributed to users of the federal exchange. They claim that the lawmakers who drafted the ACA intended for credits to be restricted to Americans who buy insurance through exchanges run by the states, not the federal government. The defendants counter that the tax subsidies were always intended to be available to everyone, and that the lawsuit misinterprets the ACA’s statutory language.
This debate over a fine point in the law turns out to have tremendous implications: About 65 percent of the nation’s population lives in the 34 states that declined to establish their own exchanges. To get tax credits, residents of these states must use HealthCare.gov. Separate estimates from RAND and the Urban Institute suggest that at least 9 million of these Americans would lose their tax credits if the court finds in favor of the King plaintiffs, with the net annual price for health insurance rising by thousands of dollars per person.
For these reasons, most observers anticipate that the Republican-controlled Congress would be forced to restore the tax credits if the court rules in favor of King. Coming up with a solution puts GOP lawmakers in a tough bind: Most are committed to the complete repeal of President Obama’s health-care law, and there is little taste among Republicans for any legislation that would help the legislation survive.
But dealing with King v. Burwell wouldn’t just be a national problem for the GOP; it would even more profoundly be a local problem for the party. As political scientists Theda Skocpol and Lawrence Jacobs have observed, most of the states that refused to start their own exchanges are either Republican strongholds or those that happened to be under Republican control at the time the exchanges were established. Making things worse for the GOP is that many of these Republican-controlled states have also opted to reject the ACA’s expansion of Medicaid eligibility to those just above the poverty line. As RAND has noted, this has forced more of these states’ residents to rely on tax credits — and thus the federal exchange — to pay for health insurance.
The upshot is that a ruling for the King plaintiffs would require millions of red-state Americans to pay more for their health insurance, while leaving many blue-state residents completely untouched. This is shown in the chart below, which plots the share of each state’s residents estimated to lose tax credits if the lawsuit succeeds against the share of the two-party vote received by Republican Mitt Romney in the 2012 presidential election.
The figure paints a dramatic picture of just how differently the effects of a pro-King verdict would be felt across the nation. Many of the large-population Democratic states — including California and New York — have established their own state-run exchanges and thus none of their residents would lose tax credits. Other blue states that did not set up their own exchanges have nevertheless expanded Medicaid (including Illinois and New Jersey), which would help to limit the ruling’s effects. Contrast this with the fact that residents of almost every red state would lose tax credits under a ruling in favor of King, with just two of these states — Idaho and Kentucky, which set up their own exchanges — remaining unaffected. A regression line in the figure shows the strong, significant (at p < .002) relationship between the rate of those losing their tax credits and the strength of the GOP vote among states relying on the federal exchange. All told, in the wake of a win for the King plaintiffs, 4.6 percent of Americans living in the states Romney won in 2012 would lose tax credits. Only 2 percent of those in states won by Obama would.
Coordinated and funded by the libertarian Competitive Enterprise Institute, the King v. Burwell lawsuit has been cheered on by Republican leaders at every step of the way — including the Supreme Court’s surprising decision to grant certiorari to the case in November. But as the state-by-state implications of the case become more clear, the lawsuit is shaping up to be a tremendous headache for the GOP — especially in the places its strongest supporters call home.