• Why are conservatives so happy about the exchange litigation?

    What do the challengers hope to accomplish with the exchange litigation? What would be the payoff of invalidating the IRS rule allowing people on federally facilitated exchanges to get tax credits? I don’t mean the ideological payoff—the satisfaction of winning a fight that you believe in. I mean the practical payoff. The exchange litigation isn’t a game: in the unlikely event that it succeeds, millions of middle-class Americans would lose their health insurance and millions more would have to pay a lot more for it. Even if you hate the ACA, how exactly is that a good thing?

    Look, I get the position of the employers that have brought the lawsuits. They neither want to offer health insurance nor to pay a tax penalty for failing to do so. Because the penalty only applies if one of their employees secures tax credits on an exchange, these employers would prefer it if none of their employees could get tax credits. Bringing a lawsuit to deprive your workers of federal subsidies may not win you an employer-of-the-month award, but I understand the motivation.

    That doesn’t explain, though, why conservative opponents of the ACA are cheering the litigation. The hope seems to be that it might lead to the unraveling of the ACA—that it could, as George Will put it in a recent column, “blow [the ACA] to smithereens.” But the ACA isn’t as fragile as its opponents think it is. Consider the Medicaid expansion. Although it was expected to take hold nationwide, that expectation was dashed when the Supreme Court made it easier for the states to refuse to expand their Medicaid programs. As a result, the ACA now applies differentially across the states—the poor in California are covered, for example, and the poor in Texas aren’t. The exchange litigation, if successful, would result in a similar patchwork. But if disparate Medicaid coverage hasn’t unraveled the Act, why should the disparate availability of tax credits?

    I also don’t get how the litigation would help the states that have refused to set up exchanges. Those states are already pretty sour about Obamacare. Would they really like the ACA better if their citizens couldn’t get tax credits? The Medicaid-refusal states can at least tell themselves that they rejected the expansion because they didn’t want to chip in even a small part of the price tag. But with tax credits, we’re talking exclusively about federal money—no state contributions required. I suppose it’d be possible to construct the argument that the states would be better off if some of their employers weren’t subject to the mandate penalty. I doubt, however, that the benefits of a mildly more auspicious business climate would outweigh the costs of depriving people of the (quite large) tax credits they could otherwise have received through the exchanges.

    Maybe the hope, though, is that eliminating tax credits to federally facilitated exchanges would give the Republicans some leverage in negotiating changes to the ACA. That’s certainly possible. The Democrats would probably want to fix the problematic statutory language and they’d be willing to cut a deal. But only up to a point. Without tax credits, the states would come under immense pressure to establish their own exchanges. If the Democrats couldn’t stomach Republican demands, they could just sit tight, confident that, given the amount of money on the line, most states would eventually come around. That’s already happening with the Medicaid expansion—even Utah, among the reddest of the red states, may sign up soon.

    All of which is to say that I don’t understand why conservatives are so enthusiastic about this litigation. I’ll grant that I might be too dismissive of the possibilities: the politics around health-care reform are volatile, and maybe conservatives are right to grasp any opportunity to give the administration a black eye or to throw another wrench into the ACA. Probably nothing productive will come of it, but who knows?

    In the meantime, what’s certain is that the litigation, if successful, would do a lot of damage. Given the slim likelihood that the lawsuits will accomplish much, I wonder if the challengers have given enough thought to the people—real people, with real health problems, and a real need for insurance—who could be caught in the crossfire.

    @nicholas_bagley

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