What’s the Obamacare backup plan?

Any day now, the Supreme Court will issue a decision on whether Obamacare subsidies are available to those who purchase health insurance on the federal exchange. I think the likelihood that the Court will say subsidies can’t be paid to such purchasers is a little south of 50 percent. But if the Court does decide King v. Burwell that way, millions of Americans will stand to lose their insurance subsidies. Moreover, insurance companies will stand to lose many customers, and might therefore have to raise premiums.

Today, Sylvia Mathews Burwell, President Obama’s Secretary of Health and Human Services, said there isn’t much the White House can do to prevent these results. I think she’s right.

Congress could prevent them by rewriting Obamacare to say that subsidies are available for folks who purchase on the federal exchange. But I assume that congressional Republicans are unwilling to make this change and only this change to Obamacare.

Instead, if the government loses King v. Burwell, Republicans will likely call for other adjustments to the Act. For example, Sen. Ron Johnson has suggested that subsidies be extended through August 2017 and that the individual and employer mandates be repealed.

Democrats obviously won’t accept this “fix.” Indeed, I assume that they will reject any meaningful change to Obamacare other than the excision of the language limiting subsidies to the state exchanges. Republicans can use “reconciliation” to avoid the 60-vote requirement, but President Obama could still veto any fix he doesn’t like.

Unless the Republicans agree to the modification Democrats will insist on, the Dems will risk letting millions lose their subsidies, while maximizing the pressure on states that don’t have exchanges to establish them. Meanwhile, they will let the GOP take the blame for any lost subsidies. The political advantage gained will, they assume, be substantial.

What should Republicans do? They should extend the subsidies for a period long enough (1)
to allow states that have not established exchanges to reconsider their decision and (2) to enable them to establish an exchange if they so choose. The Democrats presumably wouldn’t block this move.

It’s likely that some current hold-out states would establish exchanges if the government loses King v. Burwell. It’s one thing to resist an exchange when you know your residents can obtain subsidies on the federal exchange. It’s another to preclude your residents from obtaining subsidies at all.

If the politics of this situation are as the Democrats assume them to be, we should expect most if not all hold-out states to come aboard. They will do so either promptly or after voters have punished the politicians who balk.

This is the scenario that Jonathan Gruber famously envisaged. And it’s probably why the Obamacare legislation was written expressly to limit subsidies to state exchanges.

If a state decides not to establish an exchange, it will mean that the politics, at least in that states, do not militate in favor of doing so. In other words, it will be because the electorate doesn’t want an exchange.

Under these circumstances, the state should not have one.

JOHN adds: A senior Republican Congressman told me on Monday that Republicans are planning on bailing out the several million people who stand to lose their subsidies, at least in the short term. Why Republicans would want to salvage the disaster that is Obamacare is beyond me, but that apparently is their plan.