Traditionally, the new year is a time for reflection on the year that ended and predictions about the one to come. Conservatives had an excellent 2014, as the Republican party gained control of the Senate, won more House seats than at any time since the Great Depression, and made historic gains in state governments. What of 2015?
Already a narrative seems to be taking shape. Republican leadership in Congress, cognizant of its party’s still-damaged reputation, is looking to be as constructive as possible. Eschewing the brinkmanship that characterized 2011-2013, John Boehner and Mitch McConnell seem intent on proving that congressional Republicans can govern responsibly, so as to make voters comfortable supporting the party’s presidential nominee in 2016.
Meanwhile, Barack Obama—now a lame duck—is left to hope that economic growth burnishes his reputation enough to give the Democratic nominee, presumably Hillary Clinton, a victory in 22 months. The president has few allies left on Capitol Hill, and beyond unilateral executive action he will struggle to dictate the political agenda this year. Increasingly, attention will turn to the pre-primary phase of the presidential campaign; the Republican contest looks to be broad and rollicking, while Democrats are waiting to see whether Hillary Clinton gets a real challenge.
In other words, 2015 won’t be a year of conflict. Instead, we seem set for a period of quiescence, a nice change of pace from the rough-and-tumble year that just ended. This conventional wisdom rests on a fairly shaky assumption, though: that the Supreme Court will rule with the government in King v. Burwell.
The case involves subsidies provided in Obamacare’s exchanges. As written, the Affordable Care Act permits subsidies only to residents of states that created their own insurance exchanges. Better than two-thirds of states balked at this task, however, so the federal government set up exchanges for them, and the Internal Revenue Service ruled that their residents could receive subsidies anyway. This gave individuals and employers standing to sue, because the distribution of subsidies triggers various taxes and penalties under the ACA.
A number of lawsuits followed. The Fourth U.S. Circuit Court of Appeals ruled for the government in King, while the D.C. Circuit ruled for the plaintiffs in Halbig v. Burwell. The latter decision, made by a three-judge panel, was vacated in September, though, when the D.C. Circuit agreed to rehear the case en banc, meaning the court’s entire complement of judges would weigh in. This was widely seen as a signal that the government was set for a victory. Such en banc hearings are rare in cases like this, suggesting that the whole circuit court—now dominated by liberal judges—planned to rule in reverse.
Shortly after the midterm election, the Supreme Court shocked the political world by agreeing to hear King. Normally, the Court does not insert itself into a situation where there is no split among circuit courts, and the split between the Fourth and D.C. Circuits disappeared when Halbig was vacated—and looked unlikely to reappear. This implies there is a substantial bloc on the High Court ready to rule in favor of the plaintiffs. Whether it is a majority of the justices remains to be seen, but the Court’s interjection suggests the very real possibility that the government could lose this case.
What would happen then? In a word: trouble. Millions of people would lose their insurance subsidies, increasing their out-of-pocket costs. Given the high cost of unsubsidized insurance on the exchanges—thanks to the broad array of coverage requirements and pricing restrictions—this could create a problem of adverse selection: Healthy people drop out of the exchanges because insurance is too expensive, leaving only the sick, which in turn pushes prices up further, driving more healthy people out.
A potential solution is for recalcitrant state governments to design their own exchanges. But that fails to account for the scope of Republican dominance on the state level. The GOP has staked its ground in opposition to Obamacare; how likely are Republican state governments to salvage it? Such a rescue operation, moreover, would trigger those levies upon private individuals and enterprises. When has the Republican party ever agreed to higher taxes on business?