Bracing for SCOTUS' Ruling on Affordable Care

WASHINGTON, DC—The US Supreme Court is expected to hand down its ruling on King v. Burwell this month, possibly as soon as this week.

The case, briefly, challenges language in the Affordable Care Act regarding the subsidies, or rather tax credits, provided to residents in certain states. The plaintiffs are challenging the wording of an obscure -- but apparently key -- sentence, arguing that it means that the tax credits are only provided for residents in states that operate their own exchange.

The clause in question, for policy wonk readers is:

"The premium assistant amount determined under this subsection with respect to any cover month is the amount equal to the lesser of (A) the monthly premiums for such month for 1 or more qualified health plans offered in the individual market within a State which cover the taxpayer, the taxpayer's spouse or any dependent of the taxpayer and which were enrolled in through an Exchange established by the State …….."

How the court will rule is anyone's guess and indeed the guessing and betting on this decision has been intense.

Basically it is expected that:

Supreme Court Justices Breyer, Ginsburg, Sotomayor, and Kagan side with Burwell (the HHS Secretary);

Justices Scalia, Thomas, and Alito will side with the challenger;

Chief Justice Roberts and Justice Kennedy are enigmas.

The consensus? It will be scarily close.

A ruling in favor of the plaintiffs will not dismantle the Affordable Care Act -- but it is easy to see how it could be the beginning of its end. There will be millions of people suddenly unable to pay for their insurance dropping out of the system. Premiums will rise, probably sharply for those remaining in the system, as there are fewer insureds. The insurance companies will likely find themselves taking on these uninsured as they get sick and need insurance – because the portion of the Affordable Care Act that bans insurance companies from turning down sick people will remain in place. Thus, the insurance companies' costs will go up but in many U.S. states with progressive insurance commissioners -- Maryland, for example -- they will be hard pressed to raise rates more than a certain percentage. Death spiral enthuses.

There is more than just the human and corporate carnage too, of course. This issue will likely be a political game changer in the presidential election, especially if Republicans are unable to come up with a solution to replace the Affordable Care Act -- a measure it has been trying to overturn for years, obviously. It may surprise more than a few of the suddenly and unexpectedly uninsured that the Republicans didn't have a Plan B in the ready. One can almost hear the TV campaign spots now.

Given all this potential pain, it is almost unseemly to examine the potential consequences for commercial real estate, but clearly we must: the unwinding of the Affordable Care Act will affect the investors in medical office buildings, hospitals and extended care facilities. After all these companies have been grooming their portfolios for five years to take advantage of the Affordable Care Act's emphasis on primary care, preventative health and other such measures.

No investor contacted for this article was willing to discuss what an adverse ruling would look like for the CRE industry. However, there is another scenario to consider, which is that the fallout will be limited.

"Regardless of what the Supreme Court determines regarding the legality of federal subsidies for health insurance coverage purchased through federal exchanges, there is large and growing demand for modern, well-equipped health care facilities to meet the needs of our aging population," Jeff DeBoer, CEO of The Real Estate Roundtable tells GlobeSt.com.

"The real estate industry and its proven business model will continue working to ensure that hospitals and extended care facilities are available wherever they are needed."