This Might Have Legs – Lawsuits Challenge Legality of Federal Exchange Subsidies (Part I)

Here’s the gist of a decision I read a few weeks ago: One of the main mechanisms in the Affordable Care Act (ACA) was to set up state insurance exchanges where everyone who wasn’t (1) insured through their employers or (2) eligible for Medicaid could purchase the health insurance that they’re now mandated to have.  But health insurance is expensive, so the ACA also provided federal subsidies to people purchasing insurance on the exchanges.

Here’s the thing, though.  Congress can’t just make states establish and run these exchanges – that would (probably) violate the anti-coercion doctrine, which generally says that the federal government can’t “commandeer” the states.  So, Congress set up an alternative to the state exchanges – a federal equivalent for those states that decide they don’t want to do it themselves.  Roughly thirty states have elected to let the federal government run the exchange (the link says 26, but more recent sources put it at 34).  But there’s a tiny problem.  The way the ACA is worded, it looks like only those people shopping on state exchanges are eligible for subsidies.

This has the potential to be a big problem.  Most people shopping on the exchanges won’t be able to afford insurance without the federal subsidies.  Also keep in mind that about half of the states have opted out of the Medicaid expansion.  So in those states, the nondisabled poor and near-poor can’t get Medicaid, and they can’t afford to purchase insurance on the exchanges.  That’s a huge hole in the ACA.  As long as the GOP controls the House, good luck passing a legislative fix.

What to do, what to do?  Well, I have an idea.  Read about it in Part II.