better select -- >> you want us to write an opinion saying we have concluded that there is an insignificant risk of a substantial adverse affect on the insurance company? that's our economic conclusion, and, therefore, that's what you want me to say. >> it doesn't sound rite the way you say it. >> but you don't want them to say either there's a death spiral. you don't want us to make either of those two findings, i'm assuming? >> that's correct. now, i agree there's a risk, and the significance of it people can debate. but what i think is lost in that question and i can be whimsical about it, what's lost in it is what's on the other side. which is the fact that if you follow the government's suggestion if the court follows the government's suggestion, what is going to be lost is something we know is a central

part of the act. i mean, indeed if one sort of looks at the legislative history more broadly, i think much of it is directed towards the idea that guaranteed issue and community rating were the crown jewel of the act. the minimum coverage provision wasn't something that everybody was bragging about. it was something that was meant to be part of this package. i agree with that, but the point of it was to have guaranteed inshuns and minimum coverage. i mean, excuse me, guaranteed issue and community rating. and that's under the government's proposal would disappear. we would go back to the old system trk and under what i think is the -- the real question the court is asking, should be

asking is, would congress rather go back to the old system than to take, perhaps, the risk that you're talking about? >> you -- you're referring to the government's second position. their first, of course, is that we shouldn't address this issue at all. >> that's correct. >> i asked mr. kneedler about what procedure, or process, would be anticipated for people who be affected by the change in the law, and the change in the economic consequences. do you have a view on how that could be played out? it does seem to me that if we accept your position, something, there has to be a broad range of consequences, whether it's additional legislation, additional litigation. any thoughts on how that's going to play out? >> well, if the court adopts the position that i'm advocating, mr. chief justice, i think what would happen is that the court would say, the minimum court, by hypothesis is unconstitutional and the fact of that being unconstitutional does not mean the invalidation of any other provisions. so under the position i'm advocating, there would no longer be challenges to the remaining part of the act.

>> but if the challenge is what we're questioned today, whether if you're an insurance company and you don't believe that you can -- can give the coverage in the way congress mandated it, without the individual mandate, what type of action do you bring in the court? >> if the court follows the course that i'm advocating, you do not bring an action in the court. you go to congress, and you seek a change from congress to say the minimum coverage provision has been struck down by the court. here is -- here's the information that we have to show you what the risks are going to be. here are the adjustments you need to make. one of the questions earlier pointed out that states have adjusted their systems as they've gone along. as they've seen things work or not work. you know, i was talking earlier about the -- the different ratio for ages in insurance and states intended to change that, because they found having too narrow a

band worked against the effectiveness of their program, but they -- except for massachusetts. they didn't enact mandates. so to answer -- i think to answer your question directly, mr. chief justice, the position i'm advocating would simply have those -- those pleas go to congress, not in court. now, if one, just to discuss the issue more generally, if that's helpful, i think that if there were situations where the court deferred, let's say for discretionary reasons, say the court said we're not going to take up the question of severability and therefore not resolve it in other situations, it certainly seems to me that enforcement actions, for example, if the time comes in 2014 and somebody applies to an insurance company for a policy, and the insurance company says, well, we're not going to issue a policy. we don't think your risks are ones that we're willing to

cover, it seems to me that they could sue the insurance company, and the insurance company could raise as a defense that this provision, the guaranteed issue provision of the statute, is not enforceable, because it was inseverable from the decision, from the provision that the court held unconstitutional in 2012. >> let's consider now, how your approach severing as little as possible thereby increases the deference that we're showing to congress. it seems to me, it puts congress in this position. this act is still in full effect. there is going to be this deficit that used to be made up by the mandatory coverage provision. all of that money has to come from somewhere. you can't repeal the rest of the

act, because you're not going to get 60 votes in the senate to repeal the rest. it's not a matter of enacting a new -- you've got to get 60 votes to repeal it. so the rest of the act is going to be law. so you just put to the choice of, i guess, bankrupting insurance companies and the whole system comes tumbling down, or else enacting a federal subsidy program to the insurance companies which is what the insurance companies would like, i'm sure. do you really think that is somehow showing deference to congress and respecting the democratic process? it seems to me it's a gross distortion of it. >> well, your honor, the difficulty is that it seems to me the other possibility is for the court to make choices particularly based on what it

expects the difficulties of congress altering the legislation after a court ruling would be. i'm not aware of any severability decision that -- >> no. that wouldn't be my approach. my approach would say if you take the heart out of the statute, the statute's gone. that enables congress to do what it wants in the usual fashion, and it doesn't inject us into the process of saying, this is good. this is bad. this is good. this is bad. it seems to me it reduces our options the most and increases congress' the most. >> i guess to some extent i have to quarrel with the premise, justice scalia, because the position that i'm advocating today under which the court would only take out the minimum coverage provision, i don't think would fit the description that you have given, of taking out the heart of the statute. now, i do think once you take out guaranteed issue and community rating, you're getting closer to the heart of the statute, and one of the difficulties i think with the

government's position is that i think it's harder to cabin that, to draw that bright line around it. it's harder than the government thinks it is. i mean to begin with, even the government seems to acknowledge, i think, that the exchanges are going to be relatively pale, relatives of the exchanges as they're intended to be. we are going to have standardized products. everybody can come and make comparisons based on products that look more or less the same, but the other thing that's going to happen is with the subsidy program. the way that the subsidy program is set up, the subsidy is calculated according to essentially a benchmark plan. if the court wants to look at provisions, they begin on 64a of the private plaintiff's brief again in the appendix.

the particular provision, 68a, but there is a question. you're looking essentially to calculate the premium by looking at a standardized silver plan. first question, obviously, is there going to be any such plan if you don't have guaranteed issue and community rating, if the plans can basically be individualized? but the second problem is, that in the provision of 68a, the -- the provision that's used for calculating the subsidy, what is anticipated in the provision under the act as it is now is that you have the floor of the income. you would take this benchmark plan, and the government would pay the difference, and as we talked about earlier, the benchmark plan can change for age, and the provision says, it can be adjusted only for age. so if, in fact, you even have such a thing as a benchmark plan anymore, if the rates of people in poor health go up, because of

individual insurance underwriting, the government subsidy is not going to pay for that. >> mr. farr, i understood that the answer that you gave to justice scalia was essentially that the minimum coverage provision was not the heart of the act. instead, the minimum coverage provision was a tool to make the non-discrimination provisions community rating, guaranteed issue, work. so if you assume that, that all the minimum coverages is a tool to make those provisions work, then i guess i would refocus justice scalia's question and say, if we know that something is just a tool to make other provisions work, shouldn't that be the case in which those other provisions are severed along with the tool? >> well, i don't think so, because there are many other tools to make the same things work. that's, i think, the point. in the case that comes to mind

is new york versus the united states, where the courts struck down the title provision, but left other, two other incentives essentially in place. even without the minimum coverage provision, there will be a lot of other incentives still to bring younger people into the market and to keep them in the market. and if -- if my reading of the finding is correct, and that's all the time we're saying that this would be useful, it doesn't mean that it's impossible to have -- >> i would just like to hear before you leave your argument, if you want to, against what justice scalia just said. let's assume contrary to what you want, that the government's position is accepted by the majority of this court. and so we now are rid of quote, of the two hearts of the bill. still, there are a lot of other provisions like the indian, the black lung disease, the wellness program, that restaurants have

to have a calorie count of major menu, et cetera. now, some of them cost money. and some of them don't. what is your argument, just because the heart of the bill is gone, that has nothing to do with the validity of these other provisions, both those that cost money or at least those that cost no money, do you want to make an argument in that respect, that destroying the heart of the bill does not blow up the entire bill. it blows up the heart of the bill, and i'd just like to hear what you have to say about that. >> justice breyer, what i would say if one goes back to what i think is the proper severability standard and say would congress rather have no bill as opposed to the bill with whatever is severed from it? it seems to me when you're talking about provisions that don't have anything to do with the minimum coverage provision there's no reason to answer that question as any other way than,

yes. congress wants -- >> the real congress or a hypothetical congress? >> an objective congress. specific -- not with a vote count. >> why put congress to that false choice? because you only have two choices, congress. the whole bill or you can have -- you know, can you have parts of the bill or no bill at all. why that false choice? >> i think the reason is because severability is by necessity a blunt tool. the court doesn't have even if it had the inclination, doesn't essentially have the authority to retool the statute. >> i know so you've -- i would say stay out of politics. that's for congress, not us. but the question here is, you've read all of these cases, or dozens. have you of found a severability case where the court ever said, well, the heart of the thing is gone. and, therefore, we strike down

these other provisions that have nothing to do which would stand on their feet independently, and can be funded separately or don't require money at all? >> i think the accurate answer would be, i'm not aware of a modern case that says that. i think there probably are cases in the '20s and '30s would are more like that. if i could just take one second to address the economist brief, because justice alito raised it earlier. i just want to make one simple point. leaving asaid the whole balancing thing, if one looks at the economist brief, it's very important to note that when they are talking about one side of the balance -- may i finish? >> certainly. >> when they're talking about the balance, they're not just talking about the minimum coverage provision. they're carefully worded to say the minimum coverage provision and the subsidy programs, and then so when you're doing the mathematical balancing, the subsidies programs are extremely large. in the year 2020, expected to be over $100 billion in that one year alone.

it you're looking at the number, please consider that. >> thank you, mr. farr. mr. clement, you have four minutes remaining. >> amica's point. he says congress didn't go into the act to have a minimum coverage. they went into the act to have a different purpose. i.e. to get people coverage when they needed it. to increase coverage for people. but this is only a tool. but other states, going back to my original point that there are other tools besides minimum coverage, that congress can achieve the same goals. so if we strike just the tool, why should we strike the whole act? when congress has other tools available? >> mr. chief justice, i'll make four points of rebuttal but start with justice sotomayor's

question. congress identified it as the eesensual tool, the principl tool. not just a tool to make it work. it's a tool to pay for it, make it affordable. that's not my characterization, that's congress' characterization in so finding i on page 43 of government's brief. that bring please to my first point's in rebuttal. mr. kneedler says quite correctly, tells the court don't look at budgetary implications. the problem, once it's common ground the individual mandate is in the statute at least in part to make community rating and guaranteed issue affordable. that really is all you have to identify. that establishes the essential link that it's there to pay for. you don't have to figure out exactly how much that is and which box. i mean, clearly it's a substantial part of it, because what they were trying to do is to help individuals and put them into the risk pool and this is quoting their finding which is in order that the people in the

market, which will lower premiums. so that's what their intent was. you don't have to get to the final number. you know that's what was going on here. that's the reason alone to sever it. the government, mr. kneedler also says, there's an easy dividing line between what that want to keep and dish out. the problem with that, you read their brief and might think, oh, there's a guaranteed issue in a community rating provision subtitle in the bill. there's not. to figure what they're talking about, go to page 6 of their brief, of their opening severability brief where they tell you what's in and what's out. the easy dividing line they suggest is actually between 300 ga-1 and 300 ga-2. community rating, they say that a1 goes. but then they say a2 has to stay. a way you'll have some sort of a community rating for the exchanges. but if you actually look at those provisions, a2 makes all of these references to a1. it just doesn't work. now, in getting back to the inquiry i think this court

actually can approach, it's to look at what congress is trying to do, you need look no further than the title of the statute. patient protection and affordable care. i agree with there farr, that community rating and guaranteed issue were the crown jewels of this act. they were what was trying to provide patient protection. and what made it affordable? the individual mandate. if you strike down guaranteed issue community rating and the individual mandate there's nothing left at the heart of the act. and that takes me to my last point, simply, this court in buckley create add halfway house and it took congress 40 years to try to deal with the situation when contrary to any time of their intent they had to figure out what are we going to do when we're stuck with this band on contributions but we can't get added expenditures because the court told us we couldn't. for 40 years, they worked in that halfway house. why make them do that in health care? the choice is give congress the task of fixing the statute, the residual of the statute, after some of it struck down or giving

them the task of simply have fixing the problem on a clean slate. i don't think that's a close choice. if the individual mandate is unconstitutional, the rest of the act should fall. >> thank you, mr. clement. mr. farr? you were invited by this court to brief and argue in these cases in support of the decision bef low -- below on severability. you have carried that out, for which we are grateful. case number 11393 is submitted. we will continue argument in case number 11400 this afternoon. on your screen, paul >> we will continue argument this afternoon. mr. clement? >> another constitutionally of the act's plaszive expansion of medicaid depends on the answer to two related questions. first, is the expansion coercive and second, does that coercion matter. >> mr. clement, can i ask you, just in matter of clarification. would you be making the same argument instead of the federal

government picking up 90% of the cost, the federal government picked up 100% of the cost? >> justice kagan, i would be making the exact same argument. >> the exact same argument. so that really reduces to the selection why is a big gift from the federal government a matter of coercion? in other words, the federal government is here saying we're giving you a boat load of money. there are no matching funds requirement, there are no extrainous conditions attached to it. it's just a boat load of federal money for you to talk and spend on poor people's health care. it doesn't sound coercive to me, i have to tell you. >> well, i want to make the point, even if you had a stand-alone program that gave 100%. just 100%, boat load, nothing but boat load, it would still be a problem. >> well, you do make the

argument and you're brief. no extraneous conditions. no matching funds is coercive? >> it is. but before i make the point, you built into your question the idea that there is no conditions. and when you first asked, what about the same program with 100% matching on the newly eligible mandatory individuals. that's how the statute refers to him. and that would have a very big condition. and the very big condition is that the states in order to get that new money, they would have to agree not only to the new conditions, but the government here is -- congress is leveraging. >> let me give you a hypothetical. suppose i'm an employer and i see somebody i really like. i say i'm going to give you $10 million a year to come work for me. the person says i've never been offered anywhere approaching $10 million a year, of course i'm going to say yes to that. we would both agree that's not

coercive, right? >> i guess i would want to know where the money came from. >> wow. wow. i'm offering you $10 million a year to come work for me and you're saying this is anything but a great choice? >> sure. if i told you actually it came from my own bank account, and that's what's really going on here in part. that's why it's simply not saying -- >> can it possibly be? when a taxpayer pays tax to the federal goth, they're acting as a citizen of the united states. when a taxpayer pays taxes to new york, a person is acting as a citizen of new york. and new york can no more tell the federal government what to do with the federal government's money than the federal government can tell new york what to do with the monies that new york is collecting. >> right. and if new york and the united states figured out a way to tax individuals at greater than 100% of their income, then maybe you could just say it's two separate sovereigns, two separate taxes.

but we all know that in the real world to the extent the federal government continues to make staxs that decreases the ability on the states to tax. >> are you suggesting that at a certain point the states would have a claim against the federal government raising their taxes because somehow the states will feel coerced to lower their tax rate? >> no, justice sotomayor. i'm suggesting it's not the case to say, well, it's free money so we don't have to ask if the program is coerced. >> counsel, what percentage does it become coercive? meaning, as i look at the figures i've seen from amici, there are some states for whom

the percentage of medicaid funding to their budget is close to 40%, but there are others that are less than 10%. and you say across the board this is coercive because no state even at 10% can give it up. what's the percentage of big gift the federal government can give? because you're saying for a bankrupt state there's no gift the federal government could give them ever because it can only give them money without conditions. no matter how poorly the state is run, no matter how much the federal government doesn't want to subsidize abortions or doesn't want to subsidize some other state obligation, the federal government cannot give them 100% of their needs. >> and justice sotomayor, i'm saying essentially the opposite, which isn't that