In an episode of the television series Seinfeld, titled The Bubble Boy, the character George Costanza visits a boy named Donald. Donald has an immune deficiency and must live behind a plastic divider, or bubble, but that is not important for our story here.
George and Donald decide to play a game of Trivial Pursuit. At one point, Donald must answer the question, “Who invaded Spain in the 8th century?” Donald answers “the Moors”, which would seem to be a reasonable answer for anyone with a passing familiarity with European history. However, the answer on the card is a misprint – it says “the Moops”. George refuses to accept “the Moors” as the correct answer. As you might expect from a Seinfeld episode, Donald resorts to physical violence.
The Affordable Care Act, also known as “Obamacare”, can be understood as a three-legged stool. One leg is the requirement that health insurers insure anyone, regardless of how sick they already are. Another leg is the mandate that everyone get health insurance, or pay a penalty. The last leg is the subsidy that middle-income people receive, so that they can get insurance even if they couldn't otherwise afford it.
If any one of the legs is removed, the whole system collapses. If insurers don't have to insure anyone, they will cherry-pick the healthiest people, and the sickest people will end up with no insurance at all, like our previous system. If nobody is required to get insurance, only the sickest people will find it worthwhile, insurers will raise their rates to compensate for higher costs, and moderately healthy people will not be able to afford it. If middle-income people receive no subsidies, they will pay the smaller penalty instead, unless they get sick, and then we are back to only the sickest people buying insurance.
The Affordable Care Act sets up a system where each state can set up an exchange, where insurers can sell and where individuals can buy insurance. The federal government has set up an exchange for the states (34 of them) that did not set up their own exchange. A state that sets up its own exchange has discretion over standards for insurance plans and can negotiate prices with insurers.
In a case currently in front of the Supreme Court, King versus Burwell, the court must answer the question, “Residents of which states can receive subsidies to buy health insurance?” As it turns out, there was something of a misprint when the Affordable Care Act was drafted. The Act says, “enrolled in through an Exchange established by the State,” where, to be perfectly clear, it could have said, “enrolled in through an Exchange established by a State or the United States Department of Health and Human Services”. The plaintiffs in this case claim that the Act does not intend for residents of states using the federal exchange to receive any subsidies.
But that claim is obviously ridiculous. The state exchanges, which were not in the original bill, were allowed so that states could tailor their health insurance markets to their own requirements. Legislative history and debate at the time reveals that the idea that the federal exchange would not receive subsidies was not even considered.
George Costanza, out of spite for Donald, against all reason, insists that it was the Moops that invaded Spain. The challengers to the Affordable Care Act in King versus Burwell, out of spite for people who can't afford insurance without subsidies – or perhaps out spite for Democrats – against all reason, insist that only people in states with their own exchanges can get the subsidies.