Lewis Morris / April 21, 2015

What if the Supreme Court Strikes Down ObamaCare Subsidies?

Republicans face the unpleasant specter of a legal win and a political loss.

A major shift could be taking place in ObamaCare this June, and Republicans stand to gain big, but only if they are sure-footed. June is when the Supreme Court will announce its decision in King v. Burwell, the case regarding whether the federal government overstepped its authority in paying out subsidies to those purchasing health insurance on the federal ObamaCare exchange. But Republicans face the unpleasant specter of a legal win and a political loss.

As ObamaCare is written, each state had the option to set up its own exchange through which people would buy health insurance. These exchanges were theoretically supposed to offer cheaper coverage, though we know how that went — costs went up and continue to do so. Just the same, 36 states opted not to create their own exchanges, forcing the creation and implementation of a federal ObamaCare exchange to take up the slack. And since Barack Obama needed to keep the law afloat, he arbitrarily decided that taxpayer subsidies could be paid out through the federal exchange, too.

If the Supreme Court interprets the law literally, then the federal taxpayer subsidies will be wiped out. It’s plainly written in the law: no state-run exchange, no taxpayer subsidy for insurance. The immediate outcome will be that some 7.5 million people could lose their insurance. But not if Republicans act.

Sen. Orrin Hatch (R-UT) and Rep. Paul Ryan (R-WI) have proposed alternative plans to protect low-income people currently on the federal exchange. Tax credits would allow people to buy insurance in the private market and across state lines, something ObamaCare subsidies do not allow.

Naturally, Hatch and Ryan stand accused of creating “ObamaCare Lite,” but Ryan counters that their plans would “empower Americans to make their own health care decisions rather than government mandates.”

Republicans face a tricky situation in dealing with ObamaCare subsidies. The Supreme Court ruling, if it goes their way, offers the best opportunity yet to gut ObamaCare. Without the subsidy as it currently exists, the law could collapse. However, subsidies are popular — everybody loves “free” stuff. The American public still hates ObamaCare, but a number of polls indicate people are comfortable with taxpayer subsidies to help pay for insurance. If Republicans don’t offer a viable alternative to replacing the subsidies, the political backlash will be costly.

And that’s just what Democrats are counting on. The Obama administration and congressional Democrats have been mum about how to handle an adverse Supreme Court decision. Obama has merely said that the way to fix the problem lies with Congress. He would love nothing better than to see Republicans twist in the wind, knowing full well there is still a sizable portion of the GOP that will settle for nothing less than the complete repeal of ObamaCare. He can then blame Republicans if millions of people go uninsured.

The full repeal of ObamaCare should be the final goal, but it cannot be done in one fell swoop. And it will never be done if Republicans cannot coalesce around a plan to replace it. That can start now by developing a regime that still allows low-income people to afford insurance. Then, Republicans can put the onus on Obama, forcing the famously uncooperative president to go along with continuing subsidies that have a free-market flavor, or veto the GOP plan out of spite and force millions to lose their insurance.

Of course, this is all academic if Obama issues another arbitrary executive order that “fixes” the language of ObamaCare to allow federal subsidies. The Supreme Court could also lose its nerve and allow the subsidies to stand. Yet the justices might be less likely to do that if they know an alternative plan is in the works to keep millions from going uninsured.

Either way, the GOP should heed the advice of The Wall Street Journal: “Republicans would be wise to recall how Democrats built the entitlement state decade by decade. … Republicans will need liberal-like perseverance to reduce federal dominance over health care as well as an alternative vision that can appeal to voters.” Then again, intelligent strategy never was the GOP’s strong suit.

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