ACA trouble. Appeals court rules subsidies illegal

[DavidC]

I tend to agree. There seem to be any number of ways to substantially use the existing infrastructure in a way that minimally turns the federal exchange into a number of virtual state exchanges, just enough to pass the "smell test" to consider them state exchanges. And some of them don't require any further Congressional action.

Until such a "fix" were put into place it's a real possibility that federal subsidies will be ruled illegal and have to be returned. If I were getting federal subsides I'd be budgeting for that. And I'm not of the opinion that this "fix" would be ruled legal either and it would surely be challenged.


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[aaronc879]

Until such a "fix" were put into place it's a real possibility that federal subsidies will be ruled illegal and have to be returned. If I were getting federal subsides I'd be budgeting for that. And I'm not of the opinion that this "fix" would be ruled legal either and it would surely be challenged.


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I don't think very many of the people who qualify for significant subsidies are people who can return the money.

 

[DavidC]

I don't think very many of the people who qualify for significant subsidies are people who can return the money.

True but irrelevant. The US Government will have a fiduciary responsibility to collect what was illegally dispersed.


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[aaronc879]

True but irrelevant. The US Government will have a fiduciary responsibility to collect what was illegally dispersed.


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I wouldn't have gotten insurance if it wasn't for the significant subsidy. I won't be paying any more than what I was told I owe at the time that I signed up.

 

[samclem]

The rest will laugh as the subsidies disappear. They don't want the Feds paying for Medicaid, they won't want them paying for subsidies. And along with the subsidies would go employer mandates and penalties. Those blows to Obamacare will be irresistible to states that strongly object to it. We already have health care have and have not states -- if sustained, the DC Circuit analysis would make that an order of magnitude worse.

I can see how the individual mandate would go away in many cases (because if the person's income isn't high enough, the coverage is deemed "unaffordable," and the law allows individuals to avoid the [-]tax[/-], penalty, whatever). Would the corporate mandate also go away just because the subsidies can't be legally paid?

 

[pb4uski]

Isn't the political reality that subsidies are so popular to those who receive them and are not sufficiently unpopular to those who don't receive them that the politicians of both stripes will find some way to either change the law (retroactively if needed) or change the structure so people receiving subsidies will not have them cut-off or have to pay them back? It just seems to me that the political repercussions are so severe that no politician in their right mind would get anywhere close to them, particularly in an election year. Just trying to keep it real.

 

[pb4uski]

Until such a "fix" were put into place it's a real possibility that federal subsidies will be ruled illegal and have to be returned. If I were getting federal subsides I'd be budgeting for that. And I'm not of the opinion that this "fix" would be ruled legal either and it would surely be challenged.


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That's crazy talk. No way the politicians will allow that to happen. Besides, you can't draw blood from a stone.

 

[samclem]

Isn't the political reality that subsidies are so popular to those who receive them and are not sufficiently unpopular to those who don't receive them that the politicians of both stripes will find some way to either change the law (retroactively if needed) or change the structure so people receiving subsidies will not have them cut-off or have to pay them back?

I think that has been the hope behind a lot of this law from Day 1.

As long as the money comes from "somewhere else," the reality is that people will always want more of the free stuff. It's a "tragedy of the commons" situation: In general, no one worries about carefully spending a resource that is supplied by others.

So, restrictions on the subsidies are probably not a realistic threat to the construct established by this law. The real threat to the construct would be allowing people to opt out of paying for the benefits provided by the legislation if they, personally, don't want the benefits provided by the legislation. There's no Constitutional rationale for a challenge like that, because the Constitution, as presently interpreted, provides weak protection for personal property rights.

 

[FUEGO]

So the states just "subcontract" the running of their exchange to the feds.........problem solved with a simple contact. I'm not even sure if you need a front end unique to the state in that case since a resident will select the state they reside in at the start of their websurfing.

That was my thinking - each state licenses the federal exchange to be used in their state. Stick a *.jpg file in the banner of the page for your state's specific site, and boom, done.

 

[aaronc879]

Isn't the political reality that subsidies are so popular to those who receive them and are not sufficiently unpopular to those who don't receive them that the politicians of both stripes will find some way to either change the law (retroactively if needed) or change the structure so people receiving subsidies will not have them cut-off or have to pay them back? It just seems to me that the political repercussions are so severe that no politician in their right mind would get anywhere close to them, particularly in an election year. Just trying to keep it real.

As long as they don't say we owe back money on the subsidies we already got. If they want to cancel future subsidies then that's fine. As long as we know what we're getting into when we sign up for a plan.

 

[gauss]

As long as they don't say we owe back money on the subsidies we already got. If they want to cancel future subsidies then that's fine. As long as we know what we're getting into when we sign up for a plan.

It would be interesting to see what was in the fine print for those who signed up for a Federal exchange plan with subsidy. I wonder if this type of scenario was addressed in the fine print.

-gauss

 

[Fermion]

True but irrelevant. The US Government will have a fiduciary responsibility to collect what was illegally dispersed.


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Not a chance. At most there could be some change in future years but not for current subsidies already booked and planned for in this tax year. You would have more luck trying to milk a iguana.

 

[DavidC]

As long as they don't say we owe back money on the subsidies we already got. If they want to cancel future subsidies then that's fine. As long as we know what we're getting into when we sign up for a plan.

I am no expert on this but I understand one only received a subsidy estimate when signing up that would be trued up when filing 2014 taxes with real income and whatever rules are in place at that time. There are stories all over the web speculating some $36B will have to paid pack.


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[Fermion]

I am no expert on this but I understand one only received a subsidy estimate when signing up that would be trued up when filing 2014 taxes with real income and whatever rules are in place at that time. There are stories all over the web speculating some $36B will have to paid pack.

Easy fix for that. Just say your hard drive crashed and you threw it away.

 

[pb4uski]

I am no expert on this but I understand one only received a subsidy estimate when signing up that would be trued up when filing 2014 taxes with real income and whatever rules are in place at that time. There are stories all over the web speculating some $36B will have to paid pack.


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Well the first part of that is correct. There will be a true up of the subsidy you received in 2014 with the subsidy that you should have received based on your actual 2014 income as part of your 2014 tax return filed in early 2015. Some people will have to pay because their income was higher than the income the subsidy was based on and others will get payments because they deserve more subsidy than they received.

 

[MooreBonds]

True but irrelevant. The US Government will have a fiduciary responsibility to collect what was illegally dispersed.


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What I don't understand is....if the gov't can selectively choose which portions of the ACA to enforce and which to grant exemptions to and which to extend, and which to change AFTER the law was passed....what's keeping some department of the gov't from simply sending checks to people (or the insurance companies) in the amount of the subsidy? If they can selectively ignore and selectively choose which provisions of the ACA will be enforced, why is this court ruling suddenly going to stop them, or compel them to enact that part of the ACA if they don't want to?

 

[pb4uski]

I smell bacon!

 

[MichaelB]

The NY Times summarized the possibilities going forward. http://www.nytimes.com/2014/07/23/u...here-are-possible-next-steps.html?rref=upshot

All the judges on the D.C. Circuit could decide the Halbig v. Burwell case.

The law’s challengers could ask the Fourth Circuit to reconsider King v. Burwell.

Decisions will be issued by other courts.

Either side — or both — could appeal the rulings to the Supreme Court. .

The Supreme Court could decide the case.

Congress could act.

Appreciate the effort to keep the partisan talk at bay, it helps keep the thread on topic and of use to the community.

 

[ziggy29]

I would think there is another option: The HHS looks for a way to modify the federal exchange to allow states to set up their own virtual sandboxes, so to speak, within the current infrastructure to function as state exchanges run by the feds. This would need to be done in a way that overcomes the legal objections in the unfavorable court ruling, and probably needs to be done in a way that doesn't require Congressional action.

 

[footenote]

Here's an interesting analysis of what is likely to happen now:

"...the next stop on the legal train is the D.C. Circuit as a whole, where today’s result will likely be reversed. ... The kill-Obamacare judges won in D.C. because they had two out of three votes. But the D.C. Circuit has four Obama appointees on it. That means that in the next round before all the active judges of the court, which is called “en banc review,” the split is seven Democrats to four Republicans."

I'm betting this will all be over relatively quickly. (Source if you want to read the entire analysis, including several links to legal experts' opinions: Obamacare rulings: Two courts differ on heath insurance subsidies, but the bad decision will soon be reversed. )

 

[MichaelB]

I would think there is another option: The HHS looks for a way to modify the federal exchange to allow states to set up their own virtual sandboxes, so to speak, within the current infrastructure to function as state exchanges run by the feds. This would need to be done in a way that overcomes the legal objections in the unfavorable court ruling, and probably needs to be done in a way that doesn't require Congressional action.

Totally agree. What I find surprising is the total absence of this type of thinking across the media, both general and specialized. Especially the new "analysis" sites such as WonkBlog and The Upshot.

I have long suspected some journalists read forums for tips and inspiration. We'll soon see.

 

[MichaelB]

Most of the media reports I've read over the past couple of days have made partisan references to the appointment of judges that have or will see these ACA cases, and some of that is flowing over into our discussion. I would imagine the judges themselves are either amused or offended that their thinking can be characterized in such a simplistic way, and if given the opportunity, they would likely show a much more thoughtful approach to the cases they see, including this one.

Let's give them the benefit of the doubt on this and turn the conversation away from who appointed them and toward what happens next, how this impacts us, and what we can or should do.

 

[footenote]

I agree with ziggy79 and MichaelB on a likely workaround (ex: virtual sandbox "fronting" the federal exchange) should the lawsuit succeed.

Whether the lawsuit fails or succeeds and a workaround is implemented, it appears unlikely that the mechanics of subsidies will be upset in no-state-exchange states. (And I also agree that the media tends to emphasize the partisan nature of the lawsuit and court decisions vs practical outcomes.)

 

[donheff]

I can see how the individual mandate would go away in many cases (because if the person's income isn't high enough, the coverage is deemed "unaffordable," and the law allows individuals to avoid the [-]tax[/-], penalty, whatever). Would the corporate mandate also go away just because the subsidies can't be legally paid?

I don't know Sam. I noted that possibility because I read in some newspaper comment that the mandate employer penaties could go away where the subsidies are not available. I think it was somehow linked to the government having to pay subsidies but that may have been wrong.

Isn't the political reality that subsidies are so popular to those who receive them and are not sufficiently unpopular to those who don't receive them that the politicians of both stripes will find some way to either change the law (retroactively if needed) or change the structure so people receiving subsidies will not have them cut-off or have to pay them back? It just seems to me that the political repercussions are so severe that no politician in their right mind would get anywhere close to them, particularly in an election year. Just trying to keep it real.

I think that has been the hope behind a lot of this law from Day 1.

I agree that sponsors expected this from day one but I don't see such a reaction actually happening. I don't want to bring on the bacon so I will try to be cautious with my wording. Many opponents firmly believe that this law is disastrous for America and think anything that will undermine it such that it can eventually be overturned is a valid response. Thus the refusal by multiple states to accept the Medicaid expansion despite that fact that the Fed picks up the full tab now, 90% later. Those states punish their own poor while helping to pay the bill for the other states that that do accept Medicaid all in an effort (maybe a principled effort) to undermine and kill off the ACA. The DC Circuit decision gives those same states a much greater tool to undermine the law. They will take it. I haven't seen any evidence that opponents are willing to join in efforts to modify the ACA to improve it. I suspect that would only happen if, after many years, it becomes clear that nothing will work to kill it entirely.

 

[marko]

I'm glad I live in MA. Even if the ACA is repealed MA will revert back to "Romney care".

Heck, if I didn't have to pay MA income, sales, excise, meals, gas and liquor taxes, high property tax, tolls and other fees, paying the entire full price of my HC would be a walk in the park; I wouldn't even need to think about the subsidies!