Politics

Supreme Court Case Could End Obamacare Subsidies In 34 States

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Union leaders and supporters are preparing to rally in front of the U.S. Supreme Court Wednesday to oppose a case which could end Obamacare tax credits for residents in 34 states.

The Supreme Court case, King v. Burwell, is part of a series of lawsuits that argue that Obamacare was written to allow tax credits only on state-run exchanges. This means the Internal Revenue Service can’t provide the tax credits to people in states that opted-out of setting up their own health-care exchanges.

“The Supreme Court will hear King v. Burwell, a case that could take away healthcare for 8 million Americans and cause premiums to spike for millions more by eliminating tax credits to buy health coverage through the Affordable Care Act in approximately three dozen states,” The Service Employees International Union declared. “The resulting chaos would wreak havoc on the health care system, impacting consumers and health providers across the country.”

The SEIU is leading the rally in front of the Supreme Court building to show its support for upholding the law because of how it helps working Americans, even the parts being challenged. If the court finds that the law only specified tax subsidies for individuals in states that set up their own exchanges, then residents in all 34 states without exchanges will lose their tax credits.

Plaintiffs in the case argue that the law was clearly written to only allow tax subsidies for those individuals on state exchanges. They allege that the law was written in such a way in order to incentivize states into starting their own exchanges, but the plan backfired when 34 states refused to do so, leaving many ineligible for tax subsidies. This in turn prompted the federal government to offer subsidies to people in states that don’t have their own exchanges in violation of what the law actually specified.

The Service Employees International Union argues that the subsidies were never meant to bribe states into setting up their own exchanges and that the federal government can give subsidies to residents of states that opted-out of setting up their own exchanges.

As Mary Kay Henry, president of the SEIU, noted, “We are confident the law was written to improve the lives of all Americans, no matter where they live or where they work, and the court will not allow a political agenda to endanger the health of so many working people who are counting on the affordable healthcare the law delivers.”

The union has even conducted a recent poll which shows the vast majority of Americans support the idea of the federal government offering tax subsidies in states without their own exchanges.

John Malcolm, director of the Meese Legal Center at the Heritage Foundation, argues that what is important in this case is what the law actually says.

“It’s a matter of statutory interpretation,” Malcolm told The Daily Caller News Foundation. “What does the language mean?”

Malcolm argued that the law was clearly written to only allow tax subsidies for individuals on state exchanges. He also countered claims from the SEIU that ending tax subsidies in states without exchanges will hurt lower-income workers, at least in the long term.

“There will be in the short run, a few million that lose their tax subsidies,” Malcolm argues. “But in the long run, the cost of healthcare will go down.”

Malcolm notes that the subsidies are actually driving up costs, so if they were to end in the 34 states without exchanges, health care would become more affordable.

He also argues that ending the subsidies could cause job growth, which is being stunted because of the Employer Mandate portion of the law. As the U.S. Chamber of Commerce details, “As part of the health care reform law, beginning in 2015, certain employers with 50 or more ‘full-time equivalent’ employees (FTEs) who do not provide affordable health care coverage may be assessed a penalty if at least one full-time employee qualifies for a premium tax credit and uses it to purchase coverage in the health insurance exchange.”

Malcolm argues that this has discouraged many businesses from hiring more than 50 full-time employees, which has resulted in far less job opportunities. If the tax subsidy were to end in 34 states, businesses there would not be subjected to the Employer Mandate fee if they hire more than 50 employees, because none of them would technically be getting a tax subsidy.

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