The Fallout of a SCOTUS Health-Care Decision Could Be Quick, Devastating, and Irreversible

Millions of Americans could lose their insurance—and neither Joe Biden nor the states will be in a good position to do much about it.

An illustration of the Supreme Court seal, a dollar sign, and a stethoscope
Shutterstock / The Atlantic

This morning, the United States Supreme Court will hear the latest challenge to the Affordable Care Act, with a decision to come this spring. If the Court invalidates the law, the result will be catastrophic: Without the federal funding that supports the law’s coverage expansions, millions of Americans will quickly lose their health insurance—and neither President Joe Biden nor the states will be in a good position to do much about it.

To recap: In late 2012, by a 5–4 vote, the Supreme Court held that it would be unconstitutional for Congress to force people to buy insurance. The Court nonetheless upheld the Affordable Care Act’s individual mandate by reading it as giving people a choice: Either buy insurance or pay a tax penalty.

Five years later, in 2017, Congress zeroed out that penalty for going without insurance. Almost immediately, a group of red states filed suit, arguing that the now-toothless instruction in the ACA that people “shall” buy insurance could no longer be construed as offering people a choice.

Instead, they argued, the instruction could be read only as a coercive—and thus unconstitutional—command. The challengers further argued that because the individual mandate was an essential part of the ACA, the rest of the law had to fall with it.

On the legal merits, the argument is absurd. Its prospects at the Supreme Court are accordingly dim. Chief Justice John Roberts has already rejected two much stronger challenges to the ACA. And Justice Brett Kavanaugh may also be skeptical: He has recently written about the need, in constitutional litigation, to salvage as much of Congress’s handiwork as possible. If Roberts and Kavanaugh side with the remaining liberal justices, as seems likely, there will be five votes to reject the challenge.

Making strong predictions about the Supreme Court, however, is treacherous. The three Republican-appointed judges who have heard the case in the lower courts have all backed it so far. Some or all of the six conservative justices may too. The risk to Obamacare is small but real.

At its core, the Affordable Care Act made two big changes: It expanded Medicaid to cover everyone earning at or around the poverty level, and it reformed and subsidized the individual insurance market for the rest of the uninsured.

Because health care is expensive, both changes depend on billions and billions of dollars in federal funding. That’s why the Affordable Care Act, though it does a fair amount of regulating, is probably best understood as a spending program. In 2020 alone, for example, federal outlays under the law will total $125 billion, according to a CBO estimate. That money would evaporate if the Supreme Court were to strike the law down.

That would affect a lot of people. Nationwide, 14.8 million are covered under the Medicaid expansion. Most of them are enrolled in private Medicaid managed-care plans, which terminate coverage 30 or 60 days after they don’t get paid what they’re owed. (The precise grace period will depend on the contracts that plans have signed with the state Medicaid program.) The rest would be pitched from the Medicaid program almost immediately. These millions of people don’t have the means to buy coverage on their own.

Matters are somewhat more complicated for the private insurance market. Though current enrollees have signed one-year contracts for their health plans, those enrollees depend on premium subsidies to cover their monthly payments. The subsidies are large: They total about $5,900 a year for those subsidy-eligible individuals who buy health insurance through the exchanges. Without the subsidies, some people will still be able to make their monthly payments—but most will not. Thirty days after their first nonpayment, they too will lose coverage.

A Supreme Court decision against the ACA would also create turmoil for the individual insurance market in 2022. The end of the Affordable Care Act would mean the end of key insurance regulations, including protections for people with preexisting conditions and the requirement that insurers cover essential health benefits, such as prescription-drug coverage and maternity care. Insurers would have to redraft insurance policies in order to limit their exposure to sick enrollees—and they would have to do so in a chaotic and confused health-care environment. Most, if not all, would exit the market and wait for the dust to settle.

The unraveling would happen quickly. When the Supreme Court has reviewed a statute’s constitutionality, its decision generally takes effect right away. Though a small chance exists that the Court could delay its decision’s effective date, the Court has not taken that approach in a constitutional case in nearly four decades. In the meantime, the Court has characterized a related remedial practice as “incompatible with the judicial role.”

If the Affordable Care Act were invalidated, President Biden would be eager to reinstate the law. Control of the Senate, however, now appears to turn on the results of a runoff election in Georgia. Unless Democrats pick up both the Senate seats up for grabs, Republicans will remain in control of the chamber.

If they do, Senate Majority Leader Mitch McConnell probably won’t lift a finger to prop up the Affordable Care Act. Republicans have made repealing the law the centerpiece of their election campaigns for the past decade. While they would bear some blame for the fallout, the law’s elimination would also bloody Biden early in his administration. In the trench warfare of today’s partisan politics, that may be reason enough for McConnell to be intransigent.

McConnell has another, less noticed reason to sit on his hands—one that also involves money. The Affordable Care Act’s invalidation would mean the invalidation of billions of dollars in tax increases on high earners that were included in the law. Anti-tax Republicans aren’t about to vote to increase taxes on the wealthy.

Even supposing that Democrats pick up both the Georgia Senate seats, passing a fix won’t be easy. Most significant, they’d have to find a way to overcome the Senate’s filibuster, either by eliminating it (which they might not have the votes to do) or by proceeding through reconciliation (which can be cumbersome).

Barring that problem, a Democratic Congress could probably breathe life back into the Affordable Care Act by passing a one-sentence law that either adds a nominal tax penalty (say, $1) or strikes the instruction telling people to buy insurance. That’s because when courts “strike down” an unconstitutional law, what they’re technically doing is saying that they’ll refuse to enforce it. The law itself remains on the statute books. So if Congress fixes the constitutional problem, the courts should start enforcing the law—and the Affordable Care Act would be back in business.

Republicans, however, are sure to characterize that kind of minor fix as an end run around a Supreme Court decision striking down the entire law. That line of attack may give skittish Democrats pause. Out of an abundance of caution, they may call for a more thoroughgoing replacement of the law. But it’s not clear that Democrats are aligned on what kind of replacement they should adopt. It’s not hard to imagine the reopening of a fractious debate over health reform, with moderate Democrats such as Senator Joe Manchin calling all the shots. If so, President Biden’s first year in office could become consumed by yet another agonizing health-care debate.

If a federal response is not forthcoming, can states do anything to limit the fallout? Not really. Again, the reason is money.

Prior to the ACA, only two states had adopted laws extending health insurance to all or nearly all of their residents. The chief obstacle was not political, but financial. Because most states are prohibited by their own laws from deficit spending, they are reluctant to make commitments requiring large tax increases or savage spending cuts. They’re especially reluctant when those commitments would require them to increase spending during a recession. And that’s exactly what happens with health insurance: As people lose their jobs, they lose their workplace coverage. A state would have to pick up the tab as tax revenues drop like a rock.

Consider Michigan, where I live. Roughly $6 billion are supposed to flow into the state in 2022 through the Medicaid expansion and the subsidies for private coverage. The entire state budget, however, is only about $63 billion. To make up for the loss of federal funding, Michigan would have to permanently increase its annual budget by about 10 percent. And it would have to do so in the middle of a pandemic-related recession that has blown an enormous hole in state finances and swelled the state’s Medicaid rolls.

The story is the same elsewhere. California would have to find a way to add $26 billion to a $202 billion budget (13 percent); Maryland, $3.4 billion to a $47 billion budget (7.2 percent). Even the 12 states that haven’t expanded their Medicaid program would have to spend billions to cover what they lose: Florida, for example, would have to fill a $10.7 billion hole with a budget of just $92.2 billion.

For cash-strapped states, the numbers don’t work. Nor can states solve the problem by just passing new protections for people with preexisting conditions. Yes, everyone would have a chance to buy insurance, but they’d all have to pay full price. Sick people might be willing to do so, but lots of healthy people won’t bother, because they can always get insurance if they get sick. To cope with this adverse selection, insurers would have to raise their prices. Those increased prices would drive still more healthy people out of the market. The end result would be that only people with substantial resources could afford private coverage, and maybe not even them.

Matters are thus quite grim if the Supreme Court invalidates the Affordable Care Act. The Court’s decision would take effect immediately; a splintered Congress is unlikely to adopt a temporary patch, much less a permanent replacement; and the states lack the fiscal capacity to make up for the loss of federal dollars.

Hopefully, none of this will come to pass. Probably, the case will fizzle. But the lawsuit has already gone much further than nearly everyone expected. The Supreme Court may give the country, and President Biden, a very unwelcome gift this spring.