Supreme Court Health Care Case Has High Stakes for Employers

Author: David B. Weisenfeld, XpertHR Legal Editor

March 5, 2015

The Supreme Court heard oral arguments Wednesday in a hotly-debated Affordable Care Act case which affects the future of the 2010 health care law. At stake in King v. Burwell is whether Congress intended nationwide tax credits when it passed the ACA or whether tax subsidies were only meant for purchases on a state-run exchange. Since 34 states do not have their own exchange, a ruling against the government would undercut the ACA and put millions at risk of losing their health insurance.

Plaintiffs' attorney Michael Carvin told the justices that the ACA refers to exchanges "established by the state," not those established by the federal Department of Health and Human Services.

But Justice Anthony Kennedy expressed concern about the practical ramifications of accepting that argument. "It does seem to me if your argument is accepted, the states are being told either create your own exchange, or we'll send your insurance market into a death spiral," he said. "There's a serious Constitutional problem if we accept your argument."

Both Justice Kennedy and Justice Sonia Sotomayor told Carvin that his side's argument, if accepted, would infringe on the federal-state relationship. Justice Sotomayor pointed out that if the federal government could not set up and operate an exchange within one of these states, then costs would rise on every insurance plan offered in the country in those 34 states without their own exchange.

Speaking to XpertHR following the arguments, Philadelphia employee benefits attorney Brian Pinheiro of Ballard Spahr put matters in starker terms. "If the Supreme Court decides in favor of the challengers, subsidies that are available to individuals in the 34 states that have HHS-established Exchanges will evaporate."

That's a point Justice Elena Kagan made inside the courtroom in saying, "Congress doesn't mean to impose draconian measures on states unless it says so." She told challengers' attorney Michael Carvin, "You're essentially setting up a system where there will be customers. That's the result."

But Justice Samuel Alito found it significant that of the 34 states, only six had signed a brief in support of the Obama administration. That led him to pointedly ask Solicitor General Donald Verrilli, "How do you account for that?"

Chief Justice John Roberts, who provided the decisive vote to uphold the legality of the ACA in 2012 was mostly silent during the argument.

Meanwhile, Justice Antonin Scalia wondered whether Congress would really sit back and watch if the consequences of not allowing the federal government to operate an exchange within the states were so dire. Verrilli responded incredulously, "This Congress, Your Honor."

But Justice Scalia remained unpersuaded and later told the Solicitor General, "It seems to me the logical interpretation [of the ACA] is a state will establish a state exchange. How can the federal government set up a state exchange? That's gobbledygook."

However, Verrilli said the government's reading of the statute came directly from the ACA and said a finding for the challengers would revoke the promise of affordable care for millions of Americans.

A decision in this closely-watched case is expected by the end of the Supreme Court's term in June.