Obamacare Challengers Would Restore the Freedom to Freeload

When the Supreme Court heard oral arguments in King v. Burwell last week, the challengers argued that HealthCare.gov is not an “Exchange established by the State under 1311 of the Patient Protection and Affordable Care Act.” If the court decides in favor of the challengers, millions of people will be exempt from paying a penalty if they do purchase insurance. As a result, the challengers and millions of others will be able to pay nothing toward their healthcare and force others to pay their medical expenses.

During oral arguments in the first Obamacare case, Justice Kennedy noted that “[i]n the law of torts, our tradition, our law has been that you don’t have the duty to rescue someone if that person is in danger.” There is at least one exception to this, however; it is the Emergency Medical Treatment and Active Labor Act (EMTALA) that President Reagan signed into law in 1987.

The Emergency Medical Treatment and Active Labor Act provides everyone in the United States with an emergency medical services benefit. Under EMTALA, hospitals are required to treat anyone who needs emergency medical treatment, regardless of a person’s ability, or willingness, to pay. When hospitals give free medical care, they have no choice but to pass the costs on to their paying customers. When they do this, they compel their paying customers to help those who do not pay. In effect, EMTALA forces people who pay their own medicals expenses to also pay the medical expenses of people who do not pay.

Obamacare mitigates this problem. Under Obamacare, everyone in the United States is still entitled to receive emergency medical treatment regardless of his or her ability to pay for it, but most people can no longer get this benefit for free. Now, almost everyone whose income is above the poverty line must either purchase health insurance or pay a penalty.

The Obamacare penalty helps in two ways. First, it provides an incentive for people to purchase health insurance and thereby ensure that they will be able to pay their own medical expenses. Second, when an individual does not purchase health insurance, the penalty helps offset the costs that society must bear if the individual requires medical treatment and is unable, or unwilling, to pay for it.

In short, Obamacare strengthens the law of torts and reduces the amount of charity that people who pay their own medical bills are compelled to provide to others. If the Supreme Court decides in favor of the challengers in King v. Burwell, however, this will no longer be the case in the 34 states that use HealthCare.gov.

Under Obamacare, taxpayers are exempt from paying the penalty when their “required contribution” is greater than 8% of their household income. For taxpayers who are only eligible to purchase insurance in the individual market, the “required contribution” is equal to the price of the lowest cost bronze plan available to them through the exchange in their state, minus the amount of the tax credit that is allowed under the law.

Both the challengers and the government agree on this. Where they disagree is on the interpretation of the words “an Exchange established by the State under 1311 of the Patient Protection and Affordable Care Act.” The government argues that HealthCare.gov is “an Exchange established by the State under 1311 of the Patient Protection and Affordable Care Act.” The challengers argue that it is not.

If the court decides in favor of the challengers, no one in the 34 states that use HealthCare.gov will be eligible for premium assistance tax credits. As a result, the “required contributions” of taxpayers in these states will increase by the amount of the tax credits that they are currently eligible to receive. This will increase the “required contributions” of millions of taxpayers above 8% of their household income and thereby exempt them from having to pay the penalty, effectively, and counterintuitively, making their “required contributions” zero.

For example, consider a theoretical New Hampshire family of four with two 30 year-old adults, two children, and an annual household income of $73,000. Under the challengers’ interpretation, this family would not be eligible for a tax credit because New Hampshire is one of the 34 states that uses HealthCare.gov. As a result, the family’s “required contribution” under the law would be the price of the lowest cost bronze plan available to the family through HealthCare.gov. The price of this plan is $522 per month, which is 8.5% of the family’s monthly income. Since this is greater than 8%, the family would be exempt from paying the penalty in spite of the fact that its income is 300% of the amount of the poverty line.

In contrast, under the government’s interpretation, this family is currently eligible for a tax credit of $105 per month. With this tax credit, the family’s required contribution is $417 per month, or 6.9% percent of its monthly income. Since this is less than 8%, the family is required to pay the penalty if it does not purchase insurance. This year, the penalty for this family would be $122 per month.

The petitioners claim to be in the same situation as this theoretical family. Specifically, they claim that under the government’s interpretation, they are eligible for a tax credit and that the tax credit makes them subject to paying the penalty. There is some question if this is true for the four petitioners who are named in the case, but if it is not true for the them, it is true for millions of other Americans.

The tax credits make taxpayers liable to pay the penalty across the wide range of incomes, ages and family sizes. In an article published by the Kaiser Family Foundation, Larry Levitt and Gary Claxton estimate that “83% of those formerly subsidy-eligible uninsured people would end up being exempt from the individual mandate.” The degree to which tax credits make people liable for the penalty is evidence that Congress intended for the penalty to apply to all Americans who have the means to contribute to the cost of their healthcare.

Irrespective of Congress’s intent, the petitioners claim that they have been harmed by the government’s interpretation of the law because it “incorrectly” grants them a tax credit and the tax credit makes them subject to the penalty. But this reasoning does not consider the value of the emergency medical services benefit the government has provided under EMTALA.

It is nonsensical to claim that a person is harmed by having to pay for a portion of a benefit that the person has previously received for free, but this is, in effect, what the petitioners are claiming. In this case, a petitioner can only reasonably claim to have been harmed if the penalty that the petitioner was required to pay exceeded the value of the emergency medical services benefit that the government provided. None of the petitioners have demonstrated this. And given that the penalty is small for everyone who is eligible for tax credits, it is doubtful that anyone in the United States could reasonably claim to have been harmed by the government’s interpretation of the law.

Conversely, if the court decides in favor of the petitioners, everyone who pays for healthcare in the 34 states that use HealthCare.gov will be returned to a system where they will be forced to provide charity to people who have done nothing to help themselves.

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