King v. Burwell Outcome Could Have Significant Political Consequences

This article originally in The Hill on June 22, 2015.

By Megan McHugh

After more than 50 attempts to repeal the Affordable Care Act, the Republican Congress may have its best opportunity yet to reform or dismantle major components of the Affordable Care Act. The unpopular individual mandate, which requires most individuals to purchase health insurance or pay a fine, is high on the Republican’s list for elimination.  But while it may be tempting to target the individual mandate, it comes with an important tradeoff with political consequences.   

The opportunity for congressional action will come if the Supreme Court rules in favor of the plaintiffs in the King v. Burwell.  The case highlights why the individual mandate is unpopular, and the decision is expected any day.

The case centers on whether the Obama Administration’s Internal Revenue Service acted appropriately by providing health insurance subsidies to low- and medium-income people in all states.  Challengers argue that the law limits subsidies to individuals who purchased coverage on an exchange “established by the state.”  

If subsidies are limited to the 17 states that established their own exchanges, 6.4 million people would lose their subsidies.  Many would find health insurance coverage unaffordable, and healthy, low-cost individuals would be most likely to drop coverage.  This would lead to destabilization in the insurance markets, causing premiums to rise for those remaining.  This would eventually lead to what has been coined the “death spiral,” ultimately unraveling Obamacare.

Underlying this case is a fascinating and counterintuitive complaint.  The four plaintiffs in King v. Burwell, all residents of Virginia, contend that they are harmed by the presence of health insurance subsidies in their state, which did not establish its own exchange.  In the absence of the subsidies, the plaintiffs are exempt from the individual mandate, because the cost of insurance exceeds 8 percent of their income.

The subsidies make health insurance much more affordable for the plaintiffs.  As a result, they must purchase health insurance or pay the individual mandate’s penalty (the higher of $95 or 1 percent of income in 2014).  The plaintiffs do not want to purchase health insurance, even if it is subsidized.

The plaintiffs’ preference to decline low-cost, comprehensive health insurance is highly unusual.  Health insurance coverage is related to better access to care and better physical and mental health.   Most people want health insurance, and those who lack it report cost as the greatest barrier.  As a result, policy makers have been trying for decades to make health insurance coverage more affordable.

Although it may be difficult for most of us to relate to the plaintiffs’ preference to decline “affordable” health insurance, there is greater agreement that the federal government should not require everyone to purchase health insurance coverage.  Most Americans have an unfavorable opinion of the individual mandate, and it is among the least popular provisions of ObamaCare, with some poll data showing that most Americans want it eliminated. 

The Supreme Court upheld the legality of the individual mandate in 2012.  While the individual mandate may be legal, it is not a typical for the federal government to oblige or force all residents to do something.  Beyond compulsory education, jury duty, and being counted in the census, obligations that extend to all (or nearly all) residents are very rare. Thus, the lack of popularity surrounding the individual mandate is not surprising.

But the individual mandate is the centerpiece of the Affordable Care Act.  Requiring nearly everyone (there are some exceptions) to purchase health insurance helps to keep premiums low since enrollment includes healthy (i.e., low-cost) in addition to sick (i.e., high-cost) people.   The individual mandate, coupled with other provisions in the Act, was central to policy makers’ strategy to make health insurance more affordable, and over 16 million adults have gained coverage since the passage of the law.

There’s an important trade-off with the individual mandate, which has largely been overlooked.  On the one hand, it infringes upon personal freedom, forcing people like King and others to purchase something that they do not want.  On the other hand, it’s an effective strategy for making health insurance more affordable, which is highly desired by the general population, and a goal that extends across party lines.  

The tension associated with this tradeoff is reflected by policy makers’ wavering support for the individual mandate. Former Sen. Robert Dole (R-Kan.) and Sens. Orrin Hatch (R-Utah) and Charles Grassley (R-Iowa) all once supported the individual mandate; Obama previously argued against it in 2008.  Today, it is generally favored by Democrats, but not Republicans.

Although Congress has attempted previously to eliminate the individual mandate (as well as other parts of the law), the stakes are higher this time.  Residents of the 34 states who will lose their subsidies will expect a solution, and Obama will likely veto any legislation that eliminates the mandate.  Delayed action will have political consequences.

Is the freedom to choose whether or not one purchases health insurance coverage more valuable than the coverage gains (including greater access to care and better health) afforded by the individual mandate?  The Supreme Court may shortly force policy makers to wrestle with that question.     .

- Megan McHugh is a research assistant professor of medicine at Northwestern University.