The Wall Street Journal called on Supreme Court justices to “vindicate federalism” by striking down health care subsidies in the Affordable Care Act (ACA), but ignored the proven economic consequences such a ruling would have on the states, which has led the court in the past to refuse to inflict such harm because of those same federalist concerns.

At issue in the latest health care challenge, King v. Burwell, is whether ACA subsidies are available over the federal health care exchange website, which operates in 37 states. During oral arguments, Justice Anthony Kennedy expressed concern that the challengers' interpretation of the law -- which would deny subsidies to upwards of eight million Americans -- might be unconstitutionally coercive to those states that declined to set up their own exchange. This coercion argument was at the heart of the last ACA challenge in 2012, when the court ruled that it was unconstitutional for the federal government to threaten to deny money to states that refused to expand Medicaid, because the economic consequences would have been devastating.

In a March 5 editorial, the Journal argued that denying federal subsidies to states that refused to set up exchanges “is not the same” as denying federal funds to states that refuse to accept the Medicaid expansion. But in a brief to the Supreme Court, the states who have had to make both choices disagreed, and pointed out that the King challengers themselves had admitted this type of coercion was the same:

In [the 2012 health care challenge], the Court explained that cutting off all Medicaid funding to States that declined Medicaid expansion constituted “much more than relatively mild encouragement -- it is a gun to the head.” It “crossed the line distinguishing encouragement from coercion,” serving “no purpose other than to force unwilling States” to comply. In the court of appeals, Petitioners argued that the scheme they attribute to Congress was “the same” in its coercive nature as one invalidated in [2012]. In this Court, Petitioners prefer understatement, saying that “Congress could quite reasonably believe that elected state officials would not want to explain to voters that they had deprived them of billions of dollars by failing to establish an Exchange.” Either way, it is a novel kind of pressure to threaten to injure a State's citizens and to destroy its insurance markets in order to force State-government officials to implement a federal program.

To avoid the comparison, the Journal also downplayed the likely destabilization of the insurance markets in the event the federal tax credits are struck down, echoing a false claim from the King challengers' lawyer, Michael Carvin, who argued in court that there was "not a scintilla of evidence" that the health insurance market would enter a death spiral without the current subsidies. The Journal editorial argued that “in the 1980s and 1990s, eight states including Kentucky, Washington and New York imposed the same rules -- without subsidies. In other words, the regulations are supposedly valuable by themselves to achieve liberal policy goals.”

Here, the Journal completely ignores the fact that health insurance legislation passed at the state level without subsidies left these insurance markets far worse off than they were before the laws were passed. As former health insurance executive Wendell Potter explained, Kentucky's legislation didn't include a mandate to purchase insurance or any subsidies -- and the results were disastrous. The state's insurance market was sent into an “actual death spiral” and “lawmakers had no choice but to repeal the guaranteed issue legislation”:

In a death spiral, the number of young and healthy people in a given market continues to diminish, causing insurers to raise the rates even more. You get the picture. Eventually, the pool of customers willing and able to buy coverage becomes tiny.

When all of this began to happen in Kentucky, all but two of the more than 40 health insurers deserted the market. And the rates being offered by the remaining two were so high, very few of Kentucky's residents could afford coverage (unless, of course they were fortunate enough to work for an employer that provided subsidized benefits).

Keep in mind that unlike the federal government does under the ACA, Kentucky did not provide any subsidies in the form of tax credits to help people pay their premiums if they had to buy coverage on the state's individual market. (It is the legality of those subsidies being challenged by the plaintiffs in King v. Burwell.)

Because of adverse selection and the resulting death spiral, Kentucky lawmakers had no choice but to repeal the guaranteed issue legislation. Even with the repeal of that law in 2000, the individual insurance market did not return to its former size, and many of the insurers continue to steer clear of Kentucky.

Potter also pointed out that “Other states, including Washington and New York, experienced a similar dynamic,” with New York's insurance market shrinking “from 1.2 million to just 31,000 between 1992, when the lawmakers passed a guaranteed issue bill, and 2010.”

Photo via Flickr/Elvert Barnes under a Creative Commons License.