HHS Says It’s Got No Plan To Save Obamacare If Supreme Court Strikes Down Subsidies

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The Obama administration said Tuesday that it has no back-up plan for Obamacare if the Supreme Court rules this summer that the law restricts premium subsidies to state-run exchanges only, which would strip subsidies from millions of customers in a majority of states.

The court will hear oral arguments in King v. Burwell next week. The plaintiffs argue that the version of Obamacare passed into law restricts subsidies to customers in states that established their own exchanges instead of using

“We know of no administrative actions that could, and therefore we have no plans that would, undo the massive damage to our health care system that would be caused by an adverse decision,” Burwell said in a letter to Congress Tuesday.

In the past, Burwell has declined to say whether her department has come up with a back-up plan — and refused to inform customers of the real possibility that they’ll lose their subsidies, even while pushing Americans to sign up. (RELATED: Cornyn Berates HHS Chief For Dodging Questions On Obamacare Subsidies Case [VIDEO])

But now HHS is saying the administration doesn’t have a plan at all to keep Obamacare in action if the Supreme Court rules that the administration is doling out subsidies in violation of Obamacare itself.

As Burwell made clear in her letter Tuesday, the ruling could have serious repercussions for the health-care law. During Obamacare’s first open enrollment period, 36 states used for enrollment; about 87 percent of customers in those states are receiving subsidies. This year, 37 states are using Those millions of customers would lose their subsidies if the court rules against the administration.

“While we are confident in our position, a decision against the Administration in the King case would cause massive damage: first, millions of people would lose their health insurance subsidies and therefore would no longer be able to afford health insurance,” Burwell noted, tacitly admitting that the Affordable Care Act doesn’t actually make health insurance less expensive.

“Second, without tax subsidies healthy individuals would be far less likely to purchase health insurance leaving a disproportionate number of sick individuals in the individual insurance market, which would raise the costs for everyone else,” the secretary continued. 

A ruling against the administration could cripple Obamacare if no measures are taken to fix the law — but there are a number of possibilities to extend subsidies to all 50 states.

Given the Obama administration’s predilection for issuing “administrative fixes” to deal with kinks in Obamacare — the 2013 extension for insurance plans Obamacare canceled, the IRS rule that gives subsidies to federal workers to purchase Obamacare exchange plans, several delays for the employer mandate — some experts have wondered whether the administration would attempt to work around a court ruling in the plaintiffs’ favor. 

While the health-care law doesn’t allow states to establish their own exchanges and directly contract with for enrollment, some health policy wonks have wondered whether the administration would attempt to give back premium tax credits to states that establish a separate, go-between entity that then contracts with for enrollment. Burwell’s letter denies that HHS has any such plans, yet.

Burwell laid out a bleak scenario for Obamacare if the Supreme Court does rule against the administration. If the White House doesn’t come up with a plan to salvage the law in the case of defeat, the real price of health insurance on the exchanges will finally become a much bigger issue. While the Affordable Care Act promises inexpensive health coverage, that almost exclusively comes from taxpayer-funded subsidies — not actual decreases in the cost of care. Eliminating some subsidies could bring the issue of cost to the forefront all over again.

Other options remain, however: the Republican-controlled Congress could pass a law to amend Obamacare and extend subsidies to federally-run exchanges, which is unlikely, or states will have to take up the burden of building their own marketplaces, which will take years and hundreds of millions of dollars nationwide.

Some believe the administration is simply refusing to reveal a contingency in plan in order to keep pressure on the Court to uphold the administration’s implementation of the law. Former HHS officials under the Bush administration have noted that HHS may not want to reveal a contingency plan in case the back-up signals to the Court that officials believe the administration’s case is weak, according to The Hill, or could relieve pressure on the Court.

“Of course, they have one, they should all resign if they don’t,” Tom Scully, a former HHS official under President George W. Bush, told The Hill recently. “And they certainly should not discuss it either.”

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