Latest King v. Burwell interpretation: New exchanges may not be allowed

If the Supreme Court rules in favor of the plaintiffs in King v. Burwell and strikes down federal subsidies for residents in the 34 states that rely on the federal insurance exchange, one legal expert suggests that residents of those states may never qualify for subsidies.

Nicholas Bagley, who introduced the question recently in the Incidental Economist, pointed out that the entire King v. Burwell case focuses on provision 1311 of the Affordable Care Act, which links subsidized coverage to "an exchange established by the State." If the Court takes a literal reading of the provision, states most likely will have to act fast and create their own exchanges in order to maintain subsidies for their residents.

However, that same provision later says, "each State shall, not later than Jan. 1, 2014, establish an American Health Benefit Exchange."

So, as Bagley asked, did the states have to hit that January 2014 deadline in order to establish exchanges under provision 1311? If that is the case, then exchanges established after the King ruling--should the Court side with the plaintiffs--would not meet the provision's criteria. Subsidies would therefore never be available in these 34 states.

Interpreting the statute in that way would raise some serious federalism concerns. "Congress did not wish to threaten states when it passed the ACA," Elizabeth Wydra, chief counsel at the Constitutional Accountability Center, previously said on a call discussing the case.

When Congress created the ACA, it told the Department of Health and Human Services (HHS) to have a backup plan for states that failed to establish their own exchanges by January 2014. Their plan was for states without exchanges to default to "The deadline is thus best understood not to limit subsidies, but as an instruction to HHS about when to act on the state's behalf," Bagley wrote.

The argument Bagley proposed has yet to gain traction among King proponents. But if the Court adopted this mindset during deliberation, it would mean states without their own marketplaces are stuck between a rock and a hard place. 

The Court's decision on King v. Burwell is expected sometime in June. 

For more:
- here's the Incidental Economist article