How Obama Hoodwinked the Supreme Court on Obamacare

In the case of King v. Burwell, decided by the Supreme Court in June of 2015, President Obama won the day by convincing six justices that Obamacare would collapse if he lost.  The case involved the so-called "individual mandate," which imposes a financial penalty on those who neglect to buy health insurance.  To many observers, the wording of Affordable Care Act seemed to impose the financial penalty only in states where a state exchange had been set up, not in states where the federal exchange operated by default.

At that time, only 16 states (and the District of Columbia) had set up state exchanges; the federal exchange covered the remaining 34 states.  Thus, the specter was presented of no financial penalty for not buying health insurance in the 34 states covered only by the federal exchange.  The president argued forcefully that, absent the penalty, healthy individuals in those 34 states might well choose not to buy insurance.  Instead, only the sick would buy insurance, which would send the health insurance system into a death spiral and destroy Obamacare.

Writing for the Court, Chief Justice Roberts agreed with the president's argument that, despite doubts about the text of Obamacare, the financial penalty is vitally necessary to avoid a death spiral.  Roberts therefore opined that the financial penalty applies not only in states that established state exchanges (as the statute says), but also in states where individuals are covered only by the federal exchange.  To many observers, the decision seemed to be purely result-oriented – rescuing Obamacare from a death spiral – rather than drawn from the text of the law.

Fast-forward to today, just a little over one year later.  Insurers are announcing on practically a weekly basis that they are trimming or even eliminating their Obamacare coverage in more and more states.  They give as the reason that healthy individuals are not buying insurance under Obamacare as expected, thus triggering a death spiral.  Wait!  What?  Didn't the Supreme Court protect Obamacare against a death spiral by deciding, as the president argued, that the individual mandate applies in every state, regardless of whether it has a state exchange or the federal exchange?  What is happening?

That's easy.  The ACA exempted from the individual mandate a modest number of individuals in several categories.  But the ACA left the barn door wide open with the last category: "[a]ny applicable individual who for any month is determined by the Secretary of Health and Human Services ... to have suffered a hardship with respect to capability to obtain coverage under a qualified health plan."  That is the so-called "hardship" exemption.

The Obama administration then took it upon themselves to issue regulations defining "hardship" in such expansive terms that huge swathes of the population are exempt from the individual mandate.  You heard that right: after pleading with the Supreme Court to make sure that the individual mandate applies nationwide, so as to avoid a death spiral, the administration has itself triggered a death spiral by issuing regulations exempting tens of millions from the individual mandate.

For 2015, the list of exemptions invented by the bureaucrats and said to represent "hardship" relieving the individual from the individual mandate includes:

- homelessness,
- eviction within the past six months,
- facing eviction or foreclosure (even if not evicted yet),
- received a shutoff notice from a utility company,
- experienced domestic violence,
- death of a close family member,
- fire or flood or other disaster that caused substantial damage to your property whether natural or man-made,
- filed for bankruptcy within the past six months,
- medical expenses within the last 24 months that you couldn't afford to pay,
- unexpected increases in expenses due to caring for a family member who was ill or disabled or just aging,
- a child has no medical coverage because some other person is responsible (by court order) but has not paid,
- ineligibility for Medicaid because your state did not expand eligibility under Obamacare, or
- your individual insurance plan was cancelled and you believe other marketplace plans are unaffordable.

Those who are uninsured who can't find a way to fit into one of those categories just aren't trying.  But just in case they can't, the regulations let them make up their own category: any other hardship that prevented them from obtaining health insurance.

The effect of the hardship exemption has been to eliminate any financial pressure on millions of individuals to buy health insurance under Obamacare.  The Congressional Budget Office issued a report in June of 2014 that said, "[A]bout 30 million nonelderly residents will be uninsured in 2016 but ... 23 million uninsured people in 2016 will qualify for one or more of those exemptions.  Of the remaining 7 million uninsured people, CBO and JCT estimate that some will be granted exemptions from the penalty because of hardship or other reasons[.] ...  All told, CBO and JCT estimate that [only] about 4 million people [out of the 30 million uninsured] will pay a penalty because they are uninsured in 2016."  The Wall Street Journal summed it up on August 6, 2014: "[a]lmost 90% of the national's 30 million uninsured won't pay a penalty under the Affordable Care Act in 2016 because of a growing batch of exemptions to the health-coverage requirements."

Well played, Mr. President.  You got the decision you wanted from the Supreme Court by frightening them with the specter of a death spiral, and then you directed the issuance of regulations shielding almost all of the uninsured from the individual mandate, thus guaranteeing the very death spiral that you warned against so vigorously in the Supreme Court.  And now, as insurers are announcing their departure from Obamacare due to lack of participation by healthy individuals, you're leaving the White House, so it's someone else's problem.  As Charlie Sheen might have said, "Winning!"

In the case of King v. Burwell, decided by the Supreme Court in June of 2015, President Obama won the day by convincing six justices that Obamacare would collapse if he lost.  The case involved the so-called "individual mandate," which imposes a financial penalty on those who neglect to buy health insurance.  To many observers, the wording of Affordable Care Act seemed to impose the financial penalty only in states where a state exchange had been set up, not in states where the federal exchange operated by default.

At that time, only 16 states (and the District of Columbia) had set up state exchanges; the federal exchange covered the remaining 34 states.  Thus, the specter was presented of no financial penalty for not buying health insurance in the 34 states covered only by the federal exchange.  The president argued forcefully that, absent the penalty, healthy individuals in those 34 states might well choose not to buy insurance.  Instead, only the sick would buy insurance, which would send the health insurance system into a death spiral and destroy Obamacare.

Writing for the Court, Chief Justice Roberts agreed with the president's argument that, despite doubts about the text of Obamacare, the financial penalty is vitally necessary to avoid a death spiral.  Roberts therefore opined that the financial penalty applies not only in states that established state exchanges (as the statute says), but also in states where individuals are covered only by the federal exchange.  To many observers, the decision seemed to be purely result-oriented – rescuing Obamacare from a death spiral – rather than drawn from the text of the law.

Fast-forward to today, just a little over one year later.  Insurers are announcing on practically a weekly basis that they are trimming or even eliminating their Obamacare coverage in more and more states.  They give as the reason that healthy individuals are not buying insurance under Obamacare as expected, thus triggering a death spiral.  Wait!  What?  Didn't the Supreme Court protect Obamacare against a death spiral by deciding, as the president argued, that the individual mandate applies in every state, regardless of whether it has a state exchange or the federal exchange?  What is happening?

That's easy.  The ACA exempted from the individual mandate a modest number of individuals in several categories.  But the ACA left the barn door wide open with the last category: "[a]ny applicable individual who for any month is determined by the Secretary of Health and Human Services ... to have suffered a hardship with respect to capability to obtain coverage under a qualified health plan."  That is the so-called "hardship" exemption.

The Obama administration then took it upon themselves to issue regulations defining "hardship" in such expansive terms that huge swathes of the population are exempt from the individual mandate.  You heard that right: after pleading with the Supreme Court to make sure that the individual mandate applies nationwide, so as to avoid a death spiral, the administration has itself triggered a death spiral by issuing regulations exempting tens of millions from the individual mandate.

For 2015, the list of exemptions invented by the bureaucrats and said to represent "hardship" relieving the individual from the individual mandate includes:

- homelessness,
- eviction within the past six months,
- facing eviction or foreclosure (even if not evicted yet),
- received a shutoff notice from a utility company,
- experienced domestic violence,
- death of a close family member,
- fire or flood or other disaster that caused substantial damage to your property whether natural or man-made,
- filed for bankruptcy within the past six months,
- medical expenses within the last 24 months that you couldn't afford to pay,
- unexpected increases in expenses due to caring for a family member who was ill or disabled or just aging,
- a child has no medical coverage because some other person is responsible (by court order) but has not paid,
- ineligibility for Medicaid because your state did not expand eligibility under Obamacare, or
- your individual insurance plan was cancelled and you believe other marketplace plans are unaffordable.

Those who are uninsured who can't find a way to fit into one of those categories just aren't trying.  But just in case they can't, the regulations let them make up their own category: any other hardship that prevented them from obtaining health insurance.

The effect of the hardship exemption has been to eliminate any financial pressure on millions of individuals to buy health insurance under Obamacare.  The Congressional Budget Office issued a report in June of 2014 that said, "[A]bout 30 million nonelderly residents will be uninsured in 2016 but ... 23 million uninsured people in 2016 will qualify for one or more of those exemptions.  Of the remaining 7 million uninsured people, CBO and JCT estimate that some will be granted exemptions from the penalty because of hardship or other reasons[.] ...  All told, CBO and JCT estimate that [only] about 4 million people [out of the 30 million uninsured] will pay a penalty because they are uninsured in 2016."  The Wall Street Journal summed it up on August 6, 2014: "[a]lmost 90% of the national's 30 million uninsured won't pay a penalty under the Affordable Care Act in 2016 because of a growing batch of exemptions to the health-coverage requirements."

Well played, Mr. President.  You got the decision you wanted from the Supreme Court by frightening them with the specter of a death spiral, and then you directed the issuance of regulations shielding almost all of the uninsured from the individual mandate, thus guaranteeing the very death spiral that you warned against so vigorously in the Supreme Court.  And now, as insurers are announcing their departure from Obamacare due to lack of participation by healthy individuals, you're leaving the White House, so it's someone else's problem.  As Charlie Sheen might have said, "Winning!"