"GOP Shoves Massive Tax Hike Down Middle-Class Voters' Throats"

OK, now that I've showered, dressed and eaten lunch, let's see what the latest Halbig developments are (I'll explain below just why I didn't pounce all over the story this morning):

First, the ruling itself, courtesy of the L.A. Times:

President Obama’s healthcare law was dealt a new blow Tuesday as a federal appeals court ruled that due to a wording glitch in the Affordable Care Act, some low- and middle-income residents are not entitled to receive government assistance to subsidize their insurance.

In a 2-1 vote, a panel of judges on the U.S. Circuit Court of Appeals for the District of Columbia rejected the Obama administration’s argument that the problem was triggered by imprecise language in the complex law and that Congress had always intended to offer the subsidies nationwide to low- and middle-income people who bought insurance through one of the state or federal health exchanges created under the law.

As written, the law states that subsidies should be paid to those who purchase insurance through an “exchange established by the state.”

That would seem to leave out the 36 states in which the exchanges are operated by the federal government.

As I noted yesterday, it's possible that it may only apply to as few as 18 states as it stands, depending on the court's definition of "established by", since some states submitted a plan for their own exchange which was later withdrawn or denied, while others entered into some sort of "co-managed" marketplace. For instance, Utah's individual market is run via HC.gov, but they have their own "pre-existing" (hah!) SHOP small business exchange. Here's where each state currently stands:

  • 15 "State-Based Marketplaces" (CA, CO, CT, DC, HI, KY, MD, MA, MN, NV, NY, OR, RI, VT, WA)
  • 2 "Supported State-Based Marketplaces" (ID, NM)
  • 7 "Partnership" Marketplaces (AR, DE, IL, IA, MI, NH, WV)
  • 7 "Plan Management" Marketplaces (KS, ME, MT, NE, OH, SD, VA)
  • 2 "SB-SHOP" Marketplaces (MS, UT)
  • 18 100% "Federally-Facilitated Marketplaces" (AL, AK, AZ, FL, GA, IN, LA, MO, NJ, NC, ND, OK, PA, SC, TN, TX, WI and WY)

However, there's more confusion if the Halbig decision stands. What happens to people in Oregon and Nevada, both of which ran their own exchange last year but are in the process of moving to the federal exchange this fall? What about Massachusetts, which hopes to have their own new platform but may end up having to move to HC.gov? Conversely, what about New Mexico and Idaho, which were run through the HC.gov website for the first year, but are in the process of moving onto their own exchanges this fall?

The Incidental Economist has an excellent breakdown of the potential logistical and legal headaches that we could be looking at here.

I'll add more to the fire: Would the final ruling be retroactive?? Would people who already received tax subsidies (via a monthly "discount" on their premium payment) have to pay them back? Would it only impact those who opted for the "all at once" tax refund next April? Or would the first year be considered a "gimme" and the subsidies would only be cut off going forward?

For that matter, I don't know how the law is written when it comes to the insurance companies themselves, and I don't have the contract in front of me, but I'm pretty sure that for those of us who took the "monthly discount" option (such as myself), my legal agreement with Blue Cross Blue Shield of Michigan is for $970/month, not $993...that is, the $23/month tax subsidy may actually be a separate contract between BCBSM and the Federal Government. Would BCBSM be forced to pay back the Treasury Dept, leaving my family off the hook for the first year??

As I noted in my first post about Halbig back in June, this decision has "clusterfuck" written all over it.

HOWEVER, the title of this entry is about the political ramifications of this decision, not the logistical ones.

What exactly does this decision (if it's upheld by the full 11 member DC Court (highly unlikely) and/or the SCOTUS (who knows?)) mean in political terms?

Well, in the short term, you can look to two basic spins on the ruling. First, here's Michael F. Cannon over at Forbes. Mr. Cannon also just happens to be one of the chief advocates for the Halbig case (and a Cato Institute scholar):

"Halbig v. Burwell Would Free More Than 57 Million Americans From The ACA's Individual & Employer Mandates"

So. "Freedoms" it is again. Un-huh. Fair enough. Got it. You have the "Don't Tread On Me" Tea Party crowd all locked up with that headline, I'm sure.

Now, let's take a look at this morning's press release by Mark Totten, the presumptive Democratic nominee for Michigan Attorney General, running against incumbent Republican Bill Schutte:

"Schuette Forces Massive Tax Hike On Working Michigan Families"

"Federal court backs Schuette’s crusade to raise taxes by nearly $5,000 on a half-million Michigan families, while shipping Michigan tax dollars to California and New York"

Well, now. That's a different take indeed. And the beauty of it is that this is exactly what the end result of the ruling would be: Around 272,000 Michiganders had actually enrolled via the HC.gov exchange as of 4/19, or probably around 300,000 by now. Assuming around 85% of those received subsidies, that's around 255K. However, as Totten's press release notes, there's over 500,000 Michigan residents eligible for those subsidies.

As for the "shipping Michigan tax dollars to CA and NY", this is, again, 100% true: Some portion of the taxes paid for by Michigan residents to fund the ACA will now go exclusively to enrollees in the 15 or so states which are running their own exchanges, such as California and New York, which are the biggest exchanges outside of the federal one, of course.

Adding to the silliness is the point I've been hammering on about how the solution to this mess (assuming it's upheld) could be as simple as the other 18-36 states simply registering a domain name at GoDaddy and setting up a basic portal site (similar to what Illinois already has?) which in turn uses the HC.gov back-end to "establish" an exchange. As I noted this morning, this seemingly too-stupid-easy-to-be-true solution could have merit:

If Halbig stands, the administration could try to make it easy for states to set up state exchanges with a http://t.co/GH5hnakhxX back-end.

— Larry Levitt (@larry_levitt) July 22, 2014

@larry_levitt along the lines of this? http://t.co/zCG63MHOze

— Charles Gaba (@charles_gaba) July 22, 2014

@charles_gaba Yes, but a state would still have to WANT to set up an exchange.

— Larry Levitt (@larry_levitt) July 22, 2014

And there's the crux of the issue. The state governments would have to be WILLING to do so.

Now, you may think that this is doomed, but consider this: Some of the HC.gov-run states are already solidly or leaning blue, such as Delaware, Illinois (which may already qualify for all I know) and New Jersey (in spite of Chris Christie still being Governor...for the moment). Other states, such as Michigan and Wisconsin, are normally blue but currently run by Tea Party nutbags; these may be on the verge of reverting back to the Dem side this fall. As for other states like Florida, Texas and Louisiana, consider the following attack ad, modelled on Mark Totten's press release above:

"Tens of thousands of Louisianans will have to pay hundreds of dollars in higher taxes...all because Bobby Jindal is too petty to shell out $10 bucks for a domain name!!"

The Republicans in two dozen states thought they were playing smart politics (with people's lives, but screw them, right?) when they denied Medicaid expansion, but this has since blown up in their faces, and has now become a potent issue for Democrats in several GOP-held states. I think I know why they thought this...and why it didn't work out the way they figured.

As far as I can tell, the Republican mindset was this: Poor people don't vote. Therefore, screwing over poor people = brownie points from the GOP base without any potential downside.

However, I think they forgot something important: Regular Medicaid might only apply to poor people, but the Medicaid expansion provided for by the ACA applies to many lower-middle class people...and they do vote (at least in far greater numbers than the "dirt poor" anyway).

In this case, the potential backfire is even greater, for two reasons.

First, when those states denied Medicaid expansion, they were denying those 5 million people something which didn't exist yetWith the tax subsidies, you're yanking away cold hard cash from millions of people who already are receiving it. That's a huge difference. It's one thing to be promised something and then have that promise recalled; it's something else to actually have something in hand and then be told that you have to give it back. Ask people how they'd feel about expanding Medicare vs. having their existing Medicare taken away and you'll see my point.

Secondly, I don't know the exact voting patterns of different socioeconomic levels, but I have to imagine that most of the people receiving ACA subsidies are even more likely to be active voters than those who were screwed out of Medicaid a few rungs down the econimic ladder.

If the Democrats play this the right way--and I'd say Mark Totten is doing it right--they could turn this lemon into a huge pitcher of cool, refreshing lemonade.

Of course, a second Federal circuit court, the 4th also just issued their own ruling which upheld the IRS's right to issue subsidies to HC.gov-enrollees as well as those on state-run exchanges, which complicates things further.

Going back to why I wasn't breathlessly refreshing my browser waiting for the Halbig news to break, the final ruling by the Supreme Court (if they do take it up) or the full DC Court (if SCOTUS doesn't) could take months or up to a year or more, by which point there may have been 2 full years of open enrollment (and how would the 2nd year be handled? With subsidies or without them? So many questions...)

In other words, to quote the (incredibly underappreciated) movie Dead Again, "This is all far from over..."