Affordable Care Act in the Balance

UConn Law professor John Cogan discusses the Supreme Court case challenging the Act, saying that it had the potential to cause chaos in many states' health insurance markets.

Photo illustration of gavel, stethoscope, prescription pad, and the American flag. (iStock Photo)

Photo illustration of gavel, stethoscope, prescription pad, and the American flag. (iStock Photo)

Note: On June 25, the U.S. Supreme Court turned back the challenge to the Affordable Care Act, ruling 6-3 that the government could continue to provide tax subsidies nationwide for health insurance premiums under the act.


Before the end of June, the U.S. Supreme Court will announce its decision in King v. Burwell, the latest challenge to the Affordable Care Act (ACA) to reach the justices. The decision will be critical for the Affordable Care Act, which established the health insurance system commonly referred to as Obamacare. If the Supreme Court rules in favor of the plaintiffs (King), health insurance markets in most states will be thrown into chaos, says insurance law expert John A. Cogan Jr., an associate professor at UConn Law who has written extensively about health law and policy.

What is the King v. Burwell case all about?
The Affordable Care Act expanded private health insurance coverage through three interrelated features: (1) a requirement that insurance companies cover people with pre-existing conditions (meaning no one could be turned away), (2) a requirement that nearly everyone buy health insurance (or face a penalty), and (3) a program of federal tax subsidies to help people afford their premiums. The subsidies are offered to lower-income Americans, those who earn between 100 percent and 400 percent of the federal poverty level and who buy insurance through a health insurance exchange, an online health insurance marketplace. The ACA allows states to either set up their own health insurance exchanges or participate in the federally run exchange. Only 13 states and the District of Columbia run their own exchanges, and three more states run a state-based exchange that is federally supported. The remaining 34 state exchanges are run by the federal government or jointly by the state and federal governments. The federal tax subsidies in these 34 exchanges are the focus of this case.

King v. Burwell is ultimately a fight over the meaning of four words in the ACA: “established by the State.” The plaintiffs contend that federal premium subsidies should not be available on federal exchanges because the express language of the act limited subsidies to exchanges “established by the State.” The federal government argues that the plaintiffs’ interpretation is contrary to the act’s overall intent and structure, and inconsistent with other provisions of the ACA.

How did this language problem happen?
This language problem resulted from poorly written legislation. After the Senate passed the draft legislation in 2009, Sen. Ted Kennedy died and was replaced by a Republican. This left Senate Democrats without a filibuster-proof majority. If the draft ACA legislation was returned to the Senate for any changes – including language clean-up – after the House voted on the bill, the Senate Republicans could have killed it with a filibuster. Thus, the ACA was passed using a technical process that prevented a filibuster, but also prevented any corrections.

How would a decision for the plaintiffs affect health insurance markets?
First, it is important to note what a Supreme Court ruling for the King plaintiffs would not do: (1) it would not affect health insurance provided through an employer, and (2) would not affect health insurance in states that set up their own exchanges. For the 34 states that have exchanges run by the federal government or jointly by the state and federal governments, however, the result could be disarray in non-employer insurance markets.

According to the Kaiser Family Foundation, more than six million enrollees in those 34 states would lose their subsidies. This would make health insurance unaffordable for millions of individuals, causing many of them, particularly those who are healthier, to drop their coverage. The least healthy people, those who need the coverage the most, would be more motivated to find a way to pay the premiums. The result would be a less healthy pool of covered people, which would drive up costs, causing premiums in those 34 exchanges to skyrocket, prompting even more people to drop coverage. This would, in turn, cause premiums to go up even further. This is the classic insurance market “death spiral.”

This scenario could deal a deadly blow to the Affordable Care Act. There is no swift way to fix this problem. Partisan gridlock in Washington would make a legislative fix difficult, and there is little the states could do except set up their own exchanges, a lengthy and expensive process.

What would a decision against the plaintiffs mean?
A decision against the plaintiffs would leave the subsidies in place and could signal the beginning of the end of major challenges to the Affordable Care Act. Litigation fatigue and an upcoming presidential election would likely spell the end of large-scale efforts to dismantle the ACA and would refocus efforts on smaller changes.

Would a Supreme Court ruling for the plaintiffs affect Connecticut?
No. Connecticut operates its own exchange, Access Health CT. Federal premium subsidies would remain available for lower-income Connecticut residents who purchase health insurance from Access Health CT, regardless of the outcome in King.