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2 Judges on DC Court: “States” means “states”

While one federal court delivered the most significant rebuke to date of ObamaCare, another came to an opposite conclusion, setting the stage for more legal uncertainty.

First up,  the DC Court of Appeals ruled against the Obama Administration in Halbig v. Burwell. (The ruling is in this PDF link.)

At issue: Does the Affordable Care Act–particularly, its individual mandate and the means-tested subsidies to purchase insurance–apply to people in all 50 states, or only to some? The answer, according to the court, is “only to some,” and the implication is that the ACA has much less power than it would otherwise have.

Here’s a bit of the nitty-gritty on how this works. The text of the Affordable Care Act (ObamaCare) says that everyone must have health insurance. It also calls for taxpayer-funded subsidies to buy insurance, and sets out regulations to define acceptable forms of insurance. But the Act, through several provisions, defines that requirement and those subsidies in the context of people who live in states that have established (again, under the Act) insurance exchanges.

The law did not, however, require states to set up exchanges, so of the 50 states, only 14 have done so. So can the IRS dispense subsidies to people in the 36 states that have not set up an exchange? The short answer: No. What about the fines that businesses face for not paying for insurance for their employees? Gone. The individual mandate? Gone as well.

The three-judge panel of the Court, usually cited as the second highest in the land, decided that the IRS acted in a way that was “arbitrary, capricious, [and] an abuse of [its] discretion.” The Administration can and will ask the full Court to consider the matter, and you can expect that this will end up before the Supreme Court in a matter of time.

My favorite part of the ruling may be have come when the Court considers the argument that it ought to overlook the plain language of the relevant text (Section 36B) and instead consider the overall aim of the legislation. To quote the majority opinion, “the government and dissent in effect urge us to substitute our judgment for Congress’s. We refuse.” The opinion continues, “Section 36B plainly makes subsidies available only on Exchanges established by the states. And in the absence of any contrary indications, that text is evidence of Congress’s intent.”

In dissent, Judge Edwards leads off with this: “This case is about Appellant’s not-so-veiled attempt to gut the Patient Protection and Affordable Care Act (“ACA”).” To which the proper response might be: So what? The court needs to rule on whether the law was being properly administered, not whether the appellant’s motives were obvious or obscured. Judge Edwards also argues that it is “inconceivable” that Congress could enact a law in such a way that it could “crumble” absent state participation in exchanges. That strikes me as a naive understanding of the legislative process, overlooking the fact that in the sausage factory of lawmaking, strange things happen.

On the same day, though, the Fourth Circuit Court of Appeals came to the opposite conclusion, in King v. Burwell (link is in PDF). It said, “we cannot discern whether Congress intended one way or another to make the tax credits available on HHS-facilitated [federal] exchanges.” Thus it decided unanimously to “uphold the [IRS’s] rule as a permissible exercise of the agency’s discretion.” The idea that the IRS should have a significant role in health insurance is … let’s just say it’s not comforting.

I’ll note that the various parties to the case show, once again, how “big health” is in favor of the ACA. Weighing in in support of the law in Halbig and King were not only officials from the U.S. government, but AARP (a major seller of health insurance), the American Cancer Society, the American Diabetes Association, the American Heart Association, and the American Hospital Association. Also on the pro-ACA side was America’s Health Insurance Plans, a trade association of insurance companies that have figured they would come out ahead from the law’s personal mandates and taxpayer subsidies.

For further reading, I commend to you Michael F. Cannon’s commentary in Forbes, Halbig v. Burwell would free more than 57 million Americans from the ACA’s individual & employer mandates. I’ve met Cannon several times, and he’s been a sharp critique of the ACA. CNN, meanwhile, observes that “The easiest fix — changing the law to specify that it allows subsidies for coverage purchased through the federal government as well as state exchanges” — won’t be happening anytime soon.