While Ruling On the ACA, the Supreme Court Must Ignore Congressional Passions

Henry J. Aaron
Henry J. Aaron The Bruce and Virginia MacLaury Chair, Senior Fellow Emeritus - Economic Studies

January 6, 2015

The Supreme Court follows the election returns, quipped Mr. Dooley, the fictional but insightful political cynic created more than a century ago by Finley Peter Dunne. Now, Georgetown’s Randy Barnett, an eminent libertarian legal theorist, argues that the Supreme Court in a pending case will—and should—be swayed by Congressional debates on proposals not likely ever to become law. He argues that the nation’s highest court will be more disposed to disallow affordability tax credits under the Affordable Care Act (ACA), thereby gutting the law, if Congress has begun to consider his legislative ‘fix,’ one that he claims would repair the devastation that such a decision would cause. Whether or not one accepts the view that the Justices will be swayed by what Congress might—but in this case almost surely will not—enact, his plan is a sham and no fix at all.

Professor Barnett is right, of course, that the Supreme Court responds to broad trends in public philosophy. Until enough whites understood segregation was racist and that racism was a bad thing, the Court accepted segregation in education and just about everything else. Until the Great Depression showed how unpalatable the fruits of unregulated capitalism could be, the Supreme Court found laws barring child labor and setting minimum wages unconstitutional.

The current court fight is not about the constitutionality of the ACA, however. The Supreme Court settled that matter, affirmatively, in 2012. The issue now is whether the health reform law permits financial assistance to make health insurance affordable nationally or only in the 16 states that manage their own exchanges.  Obamacare opponents interpret a phrase in the law, that financial assistance can be paid through exchanges ‘established by a state,’ to mean that such aid cannot be paid in the 34 states that let the federal government administer the act for them. No one, opponent or supporter of Obamacare, can point to any credible evidence that those drafting the law ever doubted that Congress intended for this assistance to be available everywhere in the nation.

Professor Barnett holds that the Supreme Court is more likely to cut off financial help now being given to roughly 6 million people who receive it through exchanges run by the federal government if Congress is talking about a proposal to replace Obamacare with an alternative, one that he proposes. Professor Barnett’s plan would:

  • restore to insurance companies the right to deny coverage or base premiums on preexisting conditions and to set annual and lifetime limits on benefits;
  • cut off all financial help to all low- and moderate-income families provided by the ACA, approximately 10 million people in 2015 according to the Congressional Budget Office;
  • repeal the Act’s extensions of Medicaid coverage, 11 million people in 2015 according to CBO estimates;
  • end payments to small businesses that encourage them to extend coverage to their employees;
  • end the rules requiring private insurers to pay out at least specified percentages of premium income for health benefits, rather than for commissions, advertising, other selling expenses, and profits;
  • repeal extensions broadening Medicare coverage of preventive services;
  • would repeal provisions that allow young people up to age 26 to remain on their parents’ insurance plans; and
  • repeal provisions in the ACA that bar insurance companies from charging older people premiums more than three times higher than those charged younger customers and restore to those companies the right to charge older people eight, ten, or even larger multiples of the premiums charged to young people.

According to every pertinent public opinion poll, more Americans support than oppose all of the ACA provisions that the Barnett proposal would eliminate.

If pressed, Professor Barnett might say that he wants to keep some of these popular reforms. But probably not, as he writes that ‘the first line of any such bill should be the complete repeal of each and every word of the Affordable Care Act’ which he calls a ‘monstrosity’ that ‘must not be allowed to survive in any form.’

In place of the ACA, Barnett would provide deductions from both personal income and payroll taxes for all personal outlays for health insurance premiums. Such a deduction would be a huge break for high-bracket filers who can afford health insurance. It would do little for low-bracket filers, most of whom cannot afford to pay for coverage themselves. And many more would have to do just that, as such a tax cut would remove much of the incentive for employers to continue to offer insurance coverage to their employees.  Barnett offers no thoughts on how to help such employees afford coverage, other than the ability to deduct premiums from their taxes, if they owe any—as many of them would not.  Furthermore, he proposes no way to offset the cost of this deficit-increasing tax cut.

Barnett would also allow insurance companies, now regulated under state laws, to sell in any state.  Such a policy would override state consumer safeguards governing benefits and premiums.  It could trigger a rush by states to lower their regulatory standards in order to encourage companies to license with them so that the state could collect taxes on all insurance sold. No reputable study suggests that cross-state selling would significantly expand health insurance coverage.

That the Supreme Court should allow any proposal that has not become law, and likely never will, to shape its decisions is dubious. Were the Supreme Court to use so retrograde a proposal as Professor Barnett’s to encourage it to strip vital financial support from millions of people, it would confirm that the Court has become willing to cloak partisan politics in judicial raiment.