The Supreme Court has decided to take up one of the legal challenges to the insurance subsidies offered through the federal insurance exchange, Healthcare.gov.

This is an appeal of the case in the fourth circuit, where federal subsidies were upheld. The tenth circuit case, where the Appeals court struck down the subsidies, is still due to be heard en banc, though this decision by the Supreme Court renders that moot.

I’ve tried to game this out, proceeding from the assumption that the subsidies are dead, and I’m confused by where that would lead.

For one thing, the regulatory apparatus of the ACA would remain intact. The changes to the insurance marketplace that the ACA brought about would still exist. However, in thirty-odd states, where the state legislatures declined to set up their own state exchanges, like Pennsylvania where I live, millions of people would be required to buy health insurance that they might not be able to afford or pay a tax in lieu of insurance.

The question is, what happens then?

If consumers start dropping out of the market en masse, we could see the long foreseen insurance company death spiral in places like the deep south and the Plains where the states haven’t established exchanges. I’d be very curious what would be happening in insurance company boardrooms for the first twenty-four hours after a ruling that struck down the subsidies. The real question, I think, is what they start lobbying for legislatively. Do they want to keep the customers that the ACA promised them? Or do they want a rollback to a pre-ACA world with fewer customers?

At the same time, this could move some state legislatures to establish their own exchanges, though perhaps unwillingly. What’s especially interesting is that a situation where state exchanges have subsidies while federal exchanges do not would be a reverse of the usual federal-to-state money transfer; usually, it’s Democratic states subsidizing Republican states, but here we would see the reverse, with tax dollars flowing out of the south and the Plains and into the northeast and the West Coast. Politicians in the states without exchanges, if they recognized this, would probably be incensed by it.

For the GOP, the genius of this lawsuit is that it would damage the ACA without leaving their fingerprints on the body. They assume that Obama would have to agree to a repeal of the law if thirty states’ populations were forced to buy unaffordable health insurance. They could argue that if Obama didn’t sign repeal legislation that he’s failing the American people. However, Obama could just as easily argue that it will take a two line bill to clarify that sentence of the ACA, he’s sent text to Democrats in the House and Senate to introduce, and it’s the GOP that’s standing in the way of the American people by not moving on it. Obama hasn’t rolled over on the Affordable Care Act thus far; I don’t see that changing before January 2017, and if a Democrat is elected in 2016, that won’t change before 2021.

This one puzzles me. Because I don’t see quite where this one goes.

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