Lawsuit aims to kill subsidy

As an income-less medical student, I would be one of the 7.1 million people who have signed up for Obamacare this year—except I live in Texas, one of the 21 states that elected to not expand Medicaid. At the same time, my income of zero disqualifies me from federal subsidies, making insurance from the Marketplace unaffordable. However, the individual mandate—the part of the law that taxes those without insurance as a motivator to get insured—does not apply to me.

Putting aside the comical irony of a medical student unable to pay for medical insurance (though I feel it might be more comical if it wasn’t happening to me), I am definitely not alone. Nearly 5 million people with incomes below $11,490, including college and graduate students like myself, fall in the same coverage gap. This gap is created in part due to the 2012 Supreme Court decision that states could decide not to expand Medicaid.

For Texans and those residing in states that have refused Medicaid expansion, that coverage gap feels like a growing coverage Grand Canyon, engulfing those who don’t qualify for federal subsidies.

To add insult to injury, a group of small business owners funded by a conservative nonprofit public policy organization, The Competitive Enterprise Institute, are waging their own court battle that could deny the federal subsidies that are the main driver of the Affordable Care Act to 12.5 million Americans who qualify. This denies the American citizen looking to purchase health insurance an average of $5,290 per person.

The U.S. Court of Appeals case, Halbig v. Sebelius, ostensibly supports the cause of small business owners who point to the threat to economic development from penalties for not providing employee insurance. They also claim that the IRS did not have the right to extend the federal penalty nor subsidy, a federal tax credit, to states which did not create their own state-run health insurance marketplace.

Commentary

This case is made on the wobbly stalk of evidence that the Congressional intent was for the subsidy only to be available to the states. This evidence is from one line in the law that authorizes federal subsidies for coverage from an “Exchange established by the State under section 1311.” Only 14 states have managed to do so, which would leave the majority of states with hollow shells of a federally-managed insurance marketplace if there was not a federal subsidy.

On top of that nonsensical establishment of an exchange that offers no subsidy, 87% of federal exchange participants in 34 states are receiving federal financial assistance. If Halbig v. Sebelius were ruled in favor of the plaintiffs, millions of Americans would lose the assistance and join me in the group of people pondering what a waste of time this political maneuvering is when effectively no new options are on the table.

The federal subsidies survived the first round of litigation in a district court in January where the court ruled in favor of the IRS, but the fate of the ACA now rests in the hands of the three judges of the D.C. Court of Appeals.

I plan to follow this case closely, as will many Americans whose healthcare hangs in the balance.

Gluck, Abbe R. NEJM. 2014; 370: 896-899.

by

Rachel Solnick, MS3

This Policy Prescriptions® review is written by Rachel Solnick. Ms. Solnick is a third year medical student at Baylor College of Medicine. She plans to apply to an emergency medicine program for her residency training. Her comments are her own and do not reflect the official views of Baylor College of Medicine