Supreme Court Case Could Unravel Parts of ACA

03/04/2015 06:23 pm ET | Updated May 04, 2015
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Subsidies shall be provided in any exchange "established by the State."

Today, the Supreme Court kicked off the hearing for the King v. Burwell case, which will examine these four words from a section of the Affordable Care Act (ACA) to determine if it's legal to provide subsidies to those who purchased health insurance through the federal exchange.

The plaintiffs, lead by David King and funded by conservative groups, argue that Congress deliberately withheld tax subsidies from participants in the federal exchange in order to motivate states to set up their own exchanges.

On the other hand, the government maintains that the term "State" was envisioned to include both the state and federal exchanges.

There are three possible outcomes of this case, detailed below.

1. Subsidies remain available on federal exchanges.

If the Court sides with the government, it will most likely claim that it interpreted the phrase as the legislation intended it to be read, that is, that subsidies would be distributed through both the state and federal exchanges.

This, however, would violate expressio unius est exclusio alterius, which means that items not on the list are assumed not to be covered by the statute. In this case, the section of the law that allows for the establishment of state exchanges explicitly delineates that subsidies are available to citizens who purchase insurance on state exchanges.

Comparably, in another portion of the ACA that allows for the establishment of federal exchanges in states that do no set up a state exchange, the law does not mention the availability of subsidies.

2. Subsidies are not available on federal exchanges.

Alternatively, the Court's other option is to rule in favor of the plaintiffs, which would mean that subsidies are not available to citizens who purchase insurance on the federal exchange. This would result in 8 million people without coverage, and would undoubtedly unravel the entire health care system established during Obama's presidency.

This ruling would also raise many questions. Do Americans who are currently receiving subsidies lose them immediately, or at the next open enrollment period? Do citizens who received subsidies last year have to pay them back? Would the 27 states that did not set up an exchange revisit this decision? If so, how long would it take to set one up, and at what expense?

There is one clear group of winners, though -- employers. Under health care reform, employers face penalties when their employees are granted federal subsidies. If employees cannot obtain subsidies, their employers cannot be fined.

3. To be determined.

The Supreme Court could surprise us with a ruling that no one has predicted. Back in 2012, the Court did just that with the National Federation of Independent Business v. Sebelius case, ruling that the penalty for individuals who did not purchase health insurance was actually a tax. Could the Court shock us again?

Whatever the outcome, the King v. Burwell case has huge implications for the future of the Affordable Care Act. While the hearings start today, a decision won't likely be passed down until June. Stay tuned!