NFIB Sebelius Dissent

17 Oct

 

59

be needed to offset the costs of the Medicaid Expansion,
the reductions would no longer operate in the manner
Congress intended. They would lose their justification and
foundation. In addition, to preserve them would be ““to
eliminate a significant quid pro quo of the legislative com-
promise”” and create a statute Congress did not enact.
Legal Services Corporation v. Velazquez, 531 U. S. 533,
561 (2001) (SCALIA, J., dissenting).  It is no secret that
cutting Medicare is unpopular; and it is most improbable
Congress would have done so without at least the assur-
ance that it would render the ACA deficit-neutral.  See
ACA §§1563(a)(1), (2), 124 Stat. 270.

c
Health Insurance Exchanges and Their Federal
Subsidies

 The ACA requires each State to establish a health-
insurance “”exchange.””  Each exchange is a one-stop mar-
ketplace for individuals and small businesses to compare
community-rated health insurance and purchase the
policy of their choice. The exchanges cannot operate in the
manner Congress intended if the Individual Mandate,
Medicaid Expansion, and insurance regulations cannot
remain in force.

  The Act’’s design is to allocate billions of federal dollars
to subsidize individuals’ purchases on the exchanges.  In-
dividuals with incomes between 100 and 400 percent of
the poverty level receive tax credits to offset the cost of
insurance to the individual purchaser.  26 U. S. C. §36B
(2006 ed., Supp. IV); 42 U. S. C. §18071 (2006 ed., Supp.
IV). By 2019, 20 million of the 24 million people who will
obtain insurance through an exchange are expected to
receive an average federal subsidy of $6,460 per person.
See CBO, Analysis of the Major Health Care Legislation
Enacted in March 2010, pp. 18-–19 (Mar. 30, 2011).  With-
out the community-rating insurance regulation, however, 

60

the average federal subsidy could be much higher; for
community rating greatly lowers the enormous premiums
unhealthy individuals would otherwise pay. Federal
subsidies would make up much of the difference.

  The result would be an unintended boon to insurance
companies, an unintended harm to the federal fisc, and
a corresponding breakdown of the “”shared responsibil-
ity”” between the industry and the federal budget that
Congress intended. Thus, the federal subsidies must be
invalidated.

 In the absence of federal subsidies to purchasers, insur-
ance companies will have little incentive to sell insurance
on the exchanges. Under the ACA’’s scheme, few, if any,
individuals would want to buy individual insurance poli-
cies outside of an exchange, because federal subsidies
would be unavailable outside of an exchange.  Difficulty in
attracting individuals outside of the exchange would in
turn motivate insurers to enter exchanges, despite the
exchanges’’ onerous regulations.  See 42 U. S. C. §18031.
That system of incentives collapses if the federal subsidies
are invalidated. Without the federal subsidies, individ-
uals would lose the main incentive to purchase insurance
inside the exchanges, and some insurers may be unwilling
to offer insurance inside of exchanges.  With fewer buyers
and even fewer sellers, the exchanges would not operate
as Congress intended and may not operate at all.

  There is a second reason why, if community rating is
invalidated by the Mandate and Medicaid Expansion’’s
invalidity, exchanges cannot be implemented in a manner
consistent with the Act’’s design.  A key purpose of an
exchange is to provide a marketplace of insurance options
where prices are standardized regardless of the buy-
er’’s pre-existing conditions. See ibid. An individual who
shops for insurance through an exchange will evaluate
different insurance products. The products will offer
different benefits and prices. Congress designed the ex-

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