How Obama Could Skirt SCOTUS And The Lawsuit To Kill O-Care

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November 14, 2014 6:00 a.m.

The specter of the Supreme Court gutting Obamacare and putting health coverage for millions of people at risk is back in a very real way, with the justices taking up the lawsuit that would prohibit tax subsidies from being given to people in the 36 states that use the federal health exchange, HealthCare.gov.

But while the White House has been publicly mum about how it would address that worst-case scenario, policy experts have told TPM that there could be ways for the Obama administration to get around such a ruling.

The specifics would need to be worked out, but the crux is this: States could continue to use HealthCare.gov as their technical backdrop, but they would be considered state-based exchanges. That would allow the law’s tax subsidies to keep flowing, even if the Supreme Court were to invalidate them on the federal exchange, as the lawsuit’s plaintiffs argue it should.

“I imagine the administration would try to make it as easy as possible for states to set up exchanges, possibly including having the nuts and bolts still operated through HealthCare.gov,” Larry Levitt, vice president at the non-partisan Kaiser Family Foundation, told TPM this summer before the case reached the Supreme Court.

Joel Ario, a former Health and Human Services official who nows works at Manatt, Phelps and Phillips, also told TPM back then that the administration “could make it much easier for a second generation of state exchanges to be established now that the federal government has a viable IT platform for both state and federal exchanges to use.”

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There is already some precedent for such a move. After software problems hampered its rollout last year, Nevada is transitioning from its own state-built exchange to HealthCare.gov. But the Reno Gazette-Journal reported this week that Nevada is classified as a “supported state-based exchange,” which could protect it from any adverse Supreme Court ruling.

Oregon, which is also moving from its own state-run exchange to the federal website, has been designated the same way, according to The Oregonian.

The big question is whether GOP-led states determined to actively resist setting up their own exchanges could thwart these workarounds and stay under the protection a Supreme Court ruling hostile to Obamacare. That would not only create a major headache for the Obama administration but also deny subsidies to that state’s residents and throw Obamacare’s financial model out of whack.

And whether the Obama administration could reclassify every state’s exchange and completely neuter a Supreme Court ruling against it isn’t clear.

“One such scenario would be for HHS to effectively deem all of the exchanges to be state-based, but continue operating them through HealthCare.gov,” Caroline Pearson, vice president at Avalere Health, an independent consulting firm, told TPM earlier this year. On Thursday, she added that the legal grounds for such a move would be “uncertain,” however.

So some policy experts are skeptical. Instead, the White House might have to rely on political pressure to bring around Republicans in state government.

“Pressure would be intense on governors to act to keep tax credits flowing and avoid huge disruption for consumers and providers,” Ario said in July.

However, that was the same sort of political pressure that it was assumed would force GOP governors to expand Medicaid under Obamacare, and as history has shown many of them resisted and severely curtailed the reach and effectiveness of a key element of Obamacare.

“It would be much the same dynamic as with the Medicaid expansion,” Levitt told TPM on Thursday.

There is also the possibility, though not immediately feasible for 2015 enrollment, that states could still transition to their own state-constructed exchanges and render the whole issue moot. Idaho became the first fully Republican-controlled state this week to launch its own website.

The White House and HHS did not respond to requests for comment for this story.

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