Drew MacKenzie:
President Barack Obama is facing a “death spiral” for Obamacare as a federal court weighs a controversial legal challenge that could wipe out healthcare subsidies for millions of Americans.
The “bomb-thrower” case that could spark the destruction of Obama’s landmark domestic policy centers around the subsidies that 5 million Americans received when buying insurance through the HealthCare.gov exchanges, which sold coverage for 36 states this year, according to CNBC.
The plaintiffs in the little-known case, Halbig v. Sebelius, allege that these subsidies were illegal because Obamacare only permitted tax credits to be given to people who had bought insurance from the 14 individual states with their own exchanges, as well as the District of Colombia, not federal exchanges.
CNBC reported that 90 percent of enrollees in the federal exchanges qualified for subsidies due to their low or moderate incomes. The Affordable Care Act could go into a tailspin, before finally crashing and burning, if the courts now rule that those credits are illegal.
Writing in The National Journal, Sam Baker adds that the case could blow “a massive hole in the foundation of Obamacare.”
“For now, the stakes are a lot higher than the odds of success — challenges to the insurance subsidies have a 0-2 record in federal courts,” he wrote Monday. “But the pending D.C. Circuit ruling may be the one to break that streak, according to legal experts on both sides of the issue.”
Adds CNBC: “Take away those subsidies and many, if not most, of the enrollees on HealthCare.gov might not buy insurance next year because they will find it unaffordable at the full premium price.”
“That, in turn, could create a much-feared ‘death spiral,’ where insurance pools have too many sick enrollees and not enough young healthy ones, and premium rates skyrocket.”
Mangan also pointed out that if individuals in the states covered by HealthCare.gov cannot receive subsidies, it would also mean that the government would not be able to force businesses in those same states to provide affordable healthcare insurance to their employees under the threat of federal fines.
The so-called employer mandate in the Affordable Care Act is tied to the availability of subsidies for workers seeking individual insurance, CNBC said in explaining how Obamacare could collapse like a house of cards.
“If the courts were to decide that the Halbig plaintiffs were right, it would be a huge threat to the ACA,” said Obamacare expert Timothy Jost, a professor at the Washington and Lee University School of Law. “This is a real bomb-thrower.”
A decision on the case being heard by the U.S. Court of Appeals for the District of Columbia Circuit could come as early as Tuesday. And Halbig supporters are hopeful of winning the suit after two members of a three-judge panel who heard oral arguments on the case appeared sympathetic, CNBC reported.
