If the Supreme Court rules against the government in the latest challenge to Obamacare, conservatives will have done more than undercut the Affordable Care Act. They will also have crippled a cause they have long supported: weakening the link between health insurance and employment.
The court will hear arguments Wednesday in King v. Burwell, a case that challenges the authority of the federal government to subsidize Obamacare premiums in states that failed to establish their own insurance exchanges. The Department of Health and Human Services says that if the court rules for King, there will be no easy fix. It’s unlikely that Republicans in Congress could agree on a legislative solution, their assertions to the contrary notwithstanding.
What happens then? As Margot Sanger-Katz writes in the New York Times, a ruling for the plaintiffs wouldn’t just hurt those who get subsidies; it would generate mayhem for anybody who buys coverage on the individual market in the affected states. The loss of subsidies would raise the real cost of coverage, pushing those who need it least — people who are healthy — to stop buying it.
That would make those who remain sicker, on average, and therefore more expensive to cover — increasing premiums, pushing out yet more healthy customers and increasing premiums even more. This process is called a death spiral for a reason. It would probably happen quickly. It would be hard to reverse. And it would render the individual market toxic for people and employers alike.
This is where the effects of King v. Burwell start to clash with another deep trend in U.S. health care: the shift away from employer-sponsored coverage. From 2000 to 2010, the share of Americans who got health insurance through work fell from 70 percent to 60 percent. Obamacare has contributed to that trend, in part by making the individual market a more palatable option.
Separating health insurance from work appeals to conservatives, on the grounds of personal freedom, market efficiency and economic growth. “Americans are limited in their choices of health insurance plans based on what their employers can afford — if a health plan is even offered at all,” Rep. Paul Ryan, R-Wis., wrote in 2010. His solution was replacing the tax preference for employer-sponsored insurance with personal tax credits to buy insurance:
“Making health insurance portable means an individual no longer will live in fear of losing his or her health care along with a job. As the marketplace begins to respond to this new patient-centered control, the resulting increase in competition will improve the quality of services and provide more options to meet the diverse needs of Americans, while lowering costs.”
Sen. John McCain, R-Ariz., had made a version of that idea part of his 2008 campaign for president. The Heritage Foundation applauded his approach, arguing that the tax system’s preferential treatment of employer-sponsored insurance was unfair (it benefits only those covered by their employer), regressive (those benefits skew toward the wealthy), economically inefficient (it spurs higher health costs) and “an obstacle to labor mobility.”
All of those things are true. And if the federal tax credits survive the Supreme Court, those credits — and the construction of a regulated, affordable, usable individual insurance market made possible by those credits — could yet convince Americans that employer-sponsored insurance isn’t the only sensible way to get health coverage.
On the other hand, if King prevails, it won’t just retard Obamacare’s efforts to expand the individual market. It will also sabotage the idea that that market is anything more than a risky and deeply inferior alternative for those who can’t get coverage through their job. And it would mark companies that don’t provide coverage as irresponsible, uncompetitive or just plain cheap. Decoupling insurance from work would be set back years, if not decades.
The surprise success of the King case so far, as well as the political imperative of figuring out how to respond to a victory, raises the possibility that conservatives haven’t spent much time thinking about its longer-term consequences. Reinforcing an inefficient, unfair and uneconomic employer- centered health care system probably wasn’t one of their goals. But it will be part of their legacy if they win.