What happens if Halbig v. Sebelius is succesful?

February 3rd, 2014

I’ve blogged before about Halbig v. Sebelius, which challenges the ability of the federal government to give health care subsidies through the exchanges they, and not the states, operates. I’ll put the statutory interpretation issues aside for the moment, and focus on the practical impacts of the D.C. Circuit holding that the feds can’t give subsidies in 35 exchanges. In short, Obamacare would be FUBAR’d.

The now-Ezra-Klein-less Wonkblog offers this analysis:

Without subsidies, the vast majority of people who participate in the new exchanges would find health insurance unaffordable. In legal terms, they would not be subject to mandate. In human terms, we cannot require people to buy coverage that they cannot afford.

Put simply, destroying the subsidies destroys the mandate, which in turn destroys the possibility of insurance market reforms. An verdict in favor of Halbig would therefore reduce the private health insurance market to what it was before health reform. The end result would be very costly insurance.

People with serious illness or injury would continue to seek coverage even without the subsidy. Such adverse selection would raise average premiums, driving away even more of the relatively healthy people one requires for a functional health insurance market for individual and small-group coverage. We’ve actually seen this movie before — in Massachusetts before Romneycare, in New York State before health reform passed.

And more numbers from Jon Gruber, an ACA supporter:

At one level, the results are obvious. Federal exchanges would virtually collapse without the subsidies. The particulars remain striking. This is what Gruber’s model predicts would happen to participants in the new exchanges who are now eligible for subsidies:

More than 99 percent would be deemed to have unaffordable coverage without the subsidy.

For the typical subsidized exchange participant, the full cost of an unsubsidized bronze plan would reach 23  percent  of income.

The typical unsubsidized silver premium would double, and would average 28 percent  of income.

If subsidies were withdrawn from federal exchanges, the estimated number of Americans without coverage would increase by 6.5 million.

I’ve made the point that striking down the subsidies while leaving Obamacare in tact would demolish the exchanges in 35 states.

Let’s look at this another way though. If you combine a successful challenge Halbig with Sissel v. HHS, the origination clause challenge, two of the core elements of Obamacare would implode–the exchanges, and the mandate. Both cases, if heard together during the October 2014 term, would combine to be a silver bullet and take down Obamacare in one fell swoop. There’s no way that these provisions could be severed. If the government is bound by their argument in NFIB, invalidating the mandate/tax/penalty/unicorn cannot be severed from the guaranteed issue and community rating provisions of the ACA. The entire thing must go. Ditto for the exchange subsidies.

But, let me douse some water on that theory. The Court had the power to stop Obamacare in 2012, before anyone relied on it. Assuming these cases would be resolved by the Court in 2015 when a lot (but not nearly as many as estimated) are relying on the law, what would the argument be in favor of complete invalidation? Of course, the politics and state of Obamacare can change a lot in the next 18 months. Yet, ask yourself, why would the Court do in 2015 what it could have done in 2012. Unless, the Chief takes a mulligan.