Republicans want the Supreme Court to blow a major hole in Obamacare next year, but they are still debating whether they would help repair it—and what they should ask for in return.
There's a very real chance the high court will invalidate Obamacare's insurance subsidies in most of the country, which would be devastating for the health care law. It would become almost entirely unworkable in most states, and the cost of coverage would skyrocket.
That loss for the Affordable Care Act might seem like a clear-cut political win for the GOP, but the reality would be far messier.
Such a ruling would weaken the law's individual mandate and make coverage unaffordable for millions of people. And because many of those people live in Republican-run states or 2016 battlegrounds, they'll be asking for a solution.
That would leave Republicans with a difficult choice: Do they continue to push for an all-out repeal of the law—creating a standoff with Democrats who will dig in in the hopes of legislation undoing the Supreme Court's decision—or do they seek a deal that alleviates the law's burden on those who've lost their subsidies? Such a deal would likely include pullbacks of major parts of the law, but it would also require Republicans to give up on a full "root-and-branch" repeal.
A ruling isn't expected until June. Key GOP lawmakers are just beginning to weigh their options if the Court does invalidate the law's subsidies. Those conversations are still preliminary, and the party hasn't settled on a strategy yet. "I've had a lot of conversations about it," said Sen. Orrin Hatch, who will soon take over as the chairman of the powerful Finance Committee. "I'm just in the beginning [stages] of that."
But by the summer, both parties will need a plan. "We've got to consider everything, from a substitution for the bill to amending the bill to working with President Obama to try to get him to work in good faith with us," Hatch said.
The case before the Supreme Court argues that subsidies should not be available to people who live in states that didn't set up their own exchanges. At least for now, that's 36 states. If the challenge succeeds, coverage would become unaffordable for as many as 99 percent of enrollees in those states, according to a court brief from liberal economists. Some 4 to 5 million people would likely drop their coverage.
States that rely on the federal government to run their exchanges would also see new turmoil in their insurance markets. The subsidies that make coverage affordable would disappear, and most people who lost their subsidies would become exempt from the individual mandate—but new rules requiring insurers to cover people with preexisting conditions would remain on the books. Insurers would be stuck with only the sickest customers, and the insurance "death spiral" Obamacare strained so hard to avoid would become a real possibility.
And again, that would all happen only in states that refused to set up their own insurance exchanges—just about every red state in the country. In big, solidly Democratic states like California, Maryland, and New York, Obamacare would still work basically the same, and residents would still get financial help to cover their premiums.
That double standard, along with dramatic price increases and coverage losses in 2016 battlegrounds like Florida, North Carolina, and Ohio, would likely make the new status quo unsustainable both substantively and politically. Doing nothing may not be an option.
The question for Republicans, who will control both the House and Senate next year, is whether they can muster a political consensus to clean up the mess the Supreme Court might create—and what such a solution would look like.
The easiest option would simply be a small edit to the Affordable Care Act, to ensure that subsidies are available nationwide. The Supreme Court challenge centers on one phrase—a reference to subsidies being available in "an exchange established by the State." Congress could easily add the words "or the federal government" and this would all go away.
But that might be too simple for Republicans, especially conservatives and presidential contenders who would recoil at giving the Obama administration such an easy out. "Some will say, 'Well, all you gotta do is just file a little bill to let the federal exchanges handle matters, too.' That flies in the face of what many, many believe is an unconstitutional approach to health care. It could be simply fixed, except it doesn't fix the bill as a whole," Hatch said Thursday.
Hatch said he had discussed the issue that morning with Sen. Lamar Alexander, the incoming chairman of the Senate Health, Education, Labor, and Pensions Committee. Hatch and Alexander's committees would have the primary responsibility for writing a potential fix.
A more palatable approach could be to restore at least some of the law's subsidies in exchange for other changes. "Dealing with the subsidy issue may give us a chance to deal with a lot of other things"¦. You might want to fix that, but at the same time you fix that, you might want to do a lot of other things that need to be done to Obamacare," Sen. Chuck Grassley said.
The scope of those changes could vary wildly, from simple horse-trading on provisions like the medical-device tax and employer mandate to a more aggressive restructuring of the law's benefit structure.
"A lot depends on whether we'd have presidential help on it. I can see some modest changes, but it will not solve the myriad problems with Obamacare," Hatch said. I can see a substitute that would be a bill that really would work and save money and bring the best health care to people."
Conservative economist Douglas Holtz-Eakin, a former Congressional Budget Office director, said he could see Congress restoring the full subsidies for one or two years, while lawmakers figure out a new structure for financial assistance—something more along the lines of the health care proposal from Hatch and Sens. Richard Burr and Tom Coburn.
But even in exchange for other Obamacare concessions, Holtz-Eakin said he doubts that a GOP-led Congress would permanently restore Obamacare's subsidies in full. "I think Republicans know the current subsidy structure is too rich "¦ they can't lock that in permanently," he said.
If Congress doesn't act, or can't reach an agreement with the White House, each state would have to come up with its own solution—an extremely difficult task.
The states that haven't set up exchanges yet might not be able to set up a marketplace in time for next year's enrollment period, and would not be able to take advantage of the federal grants that helped establish the first state-run exchanges. And those obstacles only come into play if governors and state legislators can agree to move forward on an exchange.
"If the [subsidies are] invalidated—and absent effective contingency planning—a state that has declined to create its own exchange probably won't be able to stave off the immediate destabilization of its insurance market," University of Michigan law professor Nicholas Bagley wrote this week in The New England Journal of Medicine.
For now, Republican plans for a possible Congressional fix remain vague, and a solution that relies on popular "repeal and replace" talking points aren't likely to fly with the administration.
"I've already been in discussions with House leadership to address the House plan should the outcome be that way," Rep. Cory Gardner said. "We want to make sure people have opportunities for quality health care and quality insurance—affordable insurance—and that would be part of the Republican plan, should that be [the court outcome]."
"Repealing and replacing the law is a good idea, we should do that today," he said.