Could State Elections Determine Fate of Obamacare?

News coverage of last week’s elections focused on GOP gains, especially in Congress where Republicans won control of the U.S. Senate for the first time in eight years and expanded their House majority to numbers not seen since Herbert Hoover was in the White House.

With Republicans in control of Congress, politicos and pundits started to ask what this means for the President’s signature accomplishment, Obamacare. As the White House and Capitol haggle over changes to the law, it may be that GOP gains at the state level and a somewhat surprise decision by the Supreme Court on Friday, portend the fate of the law more than anything else.

As it stands today, state lawmakers decide whether or not to expand Medicaid and whether or not to establish a state exchange. (The former was mandatory before the Supreme Court’s ruling in NFIB v. Sebelius).

A slight majority of states, 28 including the District of Columbia, opted to expand Medicaid. Most expansion states are blue states, but some Republicans have also supported expansion. While the decision on expansion was largely along party lines, the decision to establish an exchange was not. Only 16 states decided to build a state exchange and a number of them are revisiting the decision as costs and technical issues continue to plague them.

In 2015, Republicans will control 31 governorships and a record 69 state legislative chambers. What might that mean for Obamacare?

Two of the expansion states, Arkansas and Pennsylvania, implemented the Medicaid portion of Obamacare through what is called the “private coverage option.” Instead of simply expanding Medicaid benefits to all persons at or below 138% of the federal poverty level, policy makers in these states opted to provide subsidies to persons to purchase more commercial-like insurance products. The differences between this option and traditional Medicaid may be more in degree than kind, but the future of the private coverage option in both states is now uncertain.

Arkansas will be under complete Republican control come January. The private coverage option was the brainchild of the out-going Democratic governor and a minority of Republican legislators. The new Republican governor will have expanded majorities in the House and Senate and the controversial private coverage option – which now provides coverage to approximately 200,000 people – could be in the crosshairs.

In Pennsylvania, the newly minted Governor-elect has pledged to do away with the private coverage option and expand Medicaid, but he’ll have to convince a Republican legislature that increased its margins in the House and Senate. People aren’t likely to lose coverage, but the way they get that coverage could change.

In states where Republicans were thought to have difficult reelections, Maine and Kansas in particular, proponents of Medicaid expansion thought the election might help bolster their efforts. But Governors Paul LePage and Sam Brownback were reelected and Republicans even took over control of the Maine Senate.

Not all Republican governors oppose Medicaid expansion. Michigan and Ohio both re-elected Republican governors who successfully expanded their Medicaid programs. Ohio did it without the consent of the legislature (which raises some doubts about its future), but Governor Kasich has proved resourceful in getting his way.

Florida’s Rick Scott – an early opponent of Obamacare who eventually warmed up to Medicaid expansion – was reelected, but it’s not clear if he’s interested in pushing for expansion and it’s even less clear that his Republican legislature intends to move.

While a majority of states acted to expand Medicaid, the overwhelming majority refused to set up an exchange – thus leaving that job to the federal government in 34 states. This is where state elections could decide the fate of Obamacare.

A week that started with bad news for the White House ended with even worse news. On Friday, the US Supreme Court agreed to review King v. Burwell, a Fourth Circuit Court of Appeals ruling affirming subsidies for persons who enroll on the federal exchange.

In passing Obamacare, Congress said subsidies would be available to those who purchase coverage from an exchange that is “established by the State.” The IRS, which runs the subsidy program, promulgated a rule that made subsidies available to all who purchase coverage regardless of whether the exchange was established by the state or the federal government.

At issue is whether the plain language of the text should rule the day or if the court should look to the larger goals of the Act and determine legislative intent. It’s unclear what the intent of Congress was in this case (in fact, anti-subsidy lawyers have made a good case that Congress intended to use the tax credit as a carrot to get states to establish exchanges).

Indeed, the concept of legislative intent is a bit of a misnomer since different people can vote for the same text thinking it means different things, and others may have voted for the Act without having any idea what it means. One politician even famously quipped, “We have to pass it to find out what’s in it.”

If – and it may be a big if after Roberts went out on a limb to save Obamacare before – the Court rules that only persons purchasing coverage from exchanges established by a state are eligible to receive subsidies, what happens next?

Pressure on states will be intense. Some will undoubtedly establish their own exchange. Others will use the decision to force changes to the law or hasten its demise. And what about the millions of people who now receive subsidies after having purchased coverage from the federal exchange?

Whatever the outcome of all this, the election showed that the fight for and against Obamacare is far from over.


Tim Costa is a government relations professional at Buchanan Ingersoll & Rooney.

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