Supreme Court case threatens PPACA health insurance laws

Three years ago a divided Supreme Court upheld the law against a broader challenge, even after arguments suggested that the five Republican appointees were poised to strike down the measure. Chief Justice John Roberts joined the court's four Democratic appointees — Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan — in the majority.

Ripple effect

Both sides say a ruling limiting tax credits would have a ripple effect. With millions of people unable to afford coverage, the administration says the individual insurance markets will be shaken: Healthy people will forgo the policies and only the sickest and most desperate will buy plans. The Urban Institute estimates premiums ultimately would increase by an average of 35 percent.

Opponents of the law don't dispute that scenario, though they say the blame would lie with the administration.

"Millions of individuals and families will hit a major roadblock: They'll be stuck with health insurance designed by Washington, D.C., that they can't afford," Republican Reps. John Kline of Minnesota, Paul Ryan of Wisconsin and Fred Upton of Michigan wrote Tuesday in the Wall Street Journal.

A ruling against the administration would also gut the law's requirement that employers provide insurance to their workers. Penalties on employers for not providing coverage are triggered when their workers receive a subsidy for PPACA exchange plan; without subsidies, there's no penalty.

'Massive damage'

The question would then be how federal and state officials respond. HHS Secretary Sylvia Mathews Burwell said last month that the administration, on its own, would be powerless to undo the "massive damage" of a high court ruling.

See also: King vs. Burwell: 5 PPACA patch ideas.

If so, the administration would have to find an accommodation with Republicans who have repeatedly sought to repeal the law. Kline, Ryan and Upton said they would push an alternative to give more choices to states and individuals.

Some states would also face new pressure to set up their own exchanges so their residents could continue to collect the tax credits.

Two shortcuts are possible. States might be allowed to pass legislation or issue an executive order declaring that they have established their own insurance marketplace — and that the healthcare.gov system runs it for them. Another option that may be more palatable to Republican leaders is to join with states that already run their own exchanges.

Unwanted insurance

In the Supreme Court case, the four Virginians say they don't want to buy the insurance required under PPACA. They say, should the court block the subsidies, they would fall within an exception to the insurance mandate for people who can't afford coverage.

One lurking issue is whether any of them have suffered the type of legal injury that entitles them to sue.

A federal appeals court upheld the IRS regulation in July on a 3-0 vote.

The justices agreed to hear the case even in the absence of a divide among federal appeals courts — something that normally is an important factor in deciding whether to take up a case.

Although a different federal appeals court rejected the administration's approach, a larger panel of judges on that court later agreed to reconsider its case, effectively eliminating the division.

—With assistance from Alex Wayne and David McLaughlin in Washington and Margaret Newkirk in Atlanta.