Another court decision against subsidies for the federal ObamaCare exchange

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  • 08/21/2022

The bell might be tolling for ObamaCare, as another federal judge rolls into what is broadly referred to as the "Halbig" controversy, after the first court decision against subsidies for federal exchange customers.  A second decision in a different circuit court ruled the opposite way.  Now the tie has been broken by a federal judge ruling in favor of Oklahoma Attorney General Scott Pruitt against those subsidies.

It will all most likely be settled at the Supreme Court.  The significance of today's ruling might be that it's now much harder to keep the case away from the Supremes, and they'll have two decisions against ObamaCare to consider.  The Pruitt case still has to pass through one more layer of federal review, and the Obama-packed D.C. Circuit Court might kill the Halbig decision of a three-judge panel, with a review from the full bench.  Maybe these two anti-ObamaCare rulings can still be tackled before they make it to SCOTUS, but the odds are shifting against it.  There's actually one more related court challenge creeping toward Washington, Indiana vs. IRS, which recently survived a dismissal challenge from the Internal Revenue Service.

The news about the Pruitt decision was broken by The Oklahomanwhich offered a summary of the case last month:

Attorney General Scott Pruitt expects a decision any day now on a lawsuit he filed against Obamacare.

But he doesn???t call it that.

???I don???t refer to the Affordable Care Act as Obamacare,??? he said in an interview in his office Wednesday. ???I don???t do that, because it???s not personal. I try to do all that I can to de-politicize these cases.???

The lawsuit, filed in federal court in Muskogee, challenges the legality of tax credits given to people who purchase health insurance on federal health care exchanges. It contends that under the act, such subsidies should be given only to people who buy insurance on state-based exchanges. Most states have not set up their own exchanges.

Despite his desire not to politicize the law, Pruitt is no stranger to cases with a heavy political payload:

Pruitt???s office lost a lawsuit against the federal government over Environmental Protection Agency regulations on haze-causing emissions from power plants and is involved in a suit over carbon dioxide emissions. He threatened to sue over costs incurred because of illegal immigration and set up a federalism unit to fight ???unwarranted regulation and systematic overreach by federal agencies, boards and offices.???

???As important as health care is, as important as these energy/EPA matters are, what???s more important is something more fundamental, and that???s the rule of law,??? Pruitt said.

While Pruitt maintains his actions are not political, he singles out President Barack Obama for special criticism.

???There has never been an administration that I can point to in history that has said to the American people that ???I have a pen and a phone, and I???m not going to wait on Congress, and I will use executive authority to bypass Congress.??????

No doubt Pruitt would say he's responding to efforts to politicize the law, which unavoidably drags him into the mud from whence America's gigantic trans-Constitutional unread-by-those-who-signed-it health care law arose.  In any event, the action will soon shift to the Supreme Court, where nobody is political at all.  It's not as if one of the Supreme Court justices was Barack Obama's former Solicitor General or anything like that.  And they'd never dream of doing something like rewriting ObamaCare on the fly to keep it alive when it clearly violates, say, the constitutional distinctions between "taxes" and "penalties."  No sirree bub, it's nothing but politics-free Solomonic wisdom from here on out.

One other development that bodes ill for ObamaCare is a new subpoena from the House Oversight Committee, described by Forbes as an effort to sort out the regulatory morass of IRS rules related to ObamaCare.  They might not have had the authority to issue some of those rules, and the process by which they arrived at the decision to snip out a certain troublesome provision could have a strong influence on judicial understandings of how the Affordable Care Act's subsidy programs were intended to work:

According to investigators, prior to March 2011, the IRS???s draft regulations included the statutory requirement that subsidy recipients enroll in coverage through an Exchange ???established by the State.??? (The employer and individual mandates are tied to the availability of the subsidies.) In March 2011, however, IRS officials read a news article about how ObamaCare opponents were considering a constitutional challenge based on the fact that the PPACA offers subsidies only in states that establish Exchanges. That statutory requirement disappeared from the draft regulations at the same time IRS officials learned that opponents might challenge that feature of the law in court.

IRS officials then worked with officials at the Department of Health and Human Services to gut that requirement. The IRS cited no statutory provisions supporting its decision. Indeed, Treasury and IRS officials told congressional investigators they knew they had no statutory authority to gut this requirement. But they did it anyway. The move was unfortunate for many reasons, not least because the IRS is currently spending billions of dollars and subjecting more than 50 million individuals and employers (including the plaintiffs in those four cases) to the related taxes not pursuant to an act of Congress, but by administrative fiat.

As a reminder of what this is all about, the Affordable Care Act explicitly restricts the payment of subsidies to ObamaCare subsidies established by states, not the federal government.  That's big trouble for ObamaCare, because most of the states decided not to set up such exchanges, leaving the majority of ObamaCare customers to purchase their insurance from the billion-dollar website known as HealthCareDotGov.  You may recall that it didn't work very well for quite a while after it was launched.

ObamaCare's defenders have argued that the rules restricting subsidies to the state exchanges were, in essence, a typo - something that was supposed to come out of the law before final passage, but, you know, nobody who signed it actually read the damn thing, so there were all sorts of surprises waiting to pop out at us.  Unfortunately for these defenders, not only does the law say what it says, but there is ample documentary evidence that at least some of the Affordable Care Act's architects very much did intend to limit those subsidies to state exchanges - it was meant to pressure recalcitrant states into taking on the burden of running ObamaCare exchanges, a form of legislative blackmail in which governors who exercised their theoretical right to decline the exchanges would be terrorized into changing their minds by angry constituents who got stuck paying a lot more for insurance than those who lived in subsidized states.  For the power-hungry scam artists that concocted ObamaCare, this was the best of both worlds: an illusion of federalism covering the brutal reality that refusing to create a state exchange was political suicide.  Obama would be able to claim that even Republican governors thought ObamaCare was such a great idea that they couldn't wait to set up their own exchanges!

It didn't work out that way, and evidently aware of that fact, some of ObamaCare's bumbling midwives decided to clip out the subsidy limitations, but they didn't catch every single reference to "exchanges established by states."   The Pruitt case challenged the ObamaCare mandates, which are tied to the subsidies, as Oklahoma's Attorney General charged that the IRS illegally "finalized a rule that would allow the federal government to punish ???large employers??? including local government with millions of dollars of tax penalties in states without health care exchanges, which is not allowed under the health care law."  Indiana's suit against the IRS is based on a similar premise.

If this whole mess rolls into the Supreme Court, and politicized judges aren't able to protect the ObamaCare subsidies (funny how no one seems to doubt how the liberal Justices will rule, isn't it?) the question would become, "Does that finish off the Affordable Care Act?"  Personally, I'd still be concerned that the subsidy trap will work the way its authors intended - states that didn't create exchanges could come under intense pressure to do so, or their citizens will be denied the plump tax subsidies granted to customers in the states that did.  It's also possible that the enduring unpopularity of ObamaCare will cause many of the states without exchanges to walk away from it, freed from both subsidies and mandates.  And there's always the chance the whole tottering edifice of ObamaCare will come down, leaving Congress to sort through the mess.  There are too many variables between here and there to make any firm predictions, but the fact that ObamaCare enrollments have been going down leads me to think it might not survive the loss of its subsidies, because there just aren't enough people to clamor for them.

Update: The full decision from Judge Ronald White in the Pruitt v. Burwell case can be found here.  If it counts for anything, Judge White served up some hot and spicy disapproval of ObamaCare and its defenders.  (I'm not sure it counts for all that much, since this decision is basically a first down in a very long drive, an ordeal the Pruitt suit had to survive rather than an enduring triumph in itself.  Still, there's always the chance Judge White's decision will have some influence at the Supreme Court.)

White cites the Halbig decision against ObamaCare subsidies approvingly, while frowning on the King decision in favor of those federal subsidies.  In fact, he chides subsidy defenders, including the dissenting judge in Halbig, as hysterics who use "apocalyptic" language about the destruction of ObamaCare, which White finds both excessive and irrelevant.  As he points out, the political motivations of those who brought suit against the Affordable Care Act have nothing to do with the legal merits of the case: "Of course a proper legal decision is not a matter of the court 'helping' one side or the other.  A lawsuit challenging a federal regulation is a commonplace occurrence in this country, not an affront to judicial dignity."

He also finds the assertion that rulings such as his, or the Halbig decision would "gut" or "destroy" ObamaCare ridiculous, since "the court is upholding the Act as written.  Congress is free to amend the ACA to provide for tax credits in both state and federal exchanges, if that is the legislative will."  Of course, President Obama and the Democrats don't want the people's representatives to have a hand in amending the law - and that's the purely political motivation causing all of this confusion in the courts.  All else is a response to the base partisan desire of the President and his Party to protect ObamaCare from the constitutional processes that could very well destroy it.

White is well aware of the behind-the-scenes struggles that went into creating the Affordable Care Act, and doesn't find it surprising that the messy deal-making process which produced the law would have yielded some untidy results, such as passages that prevent the federal exchange from awarding subsidies.  As he points out, that's hardly unique to the ACA.  For the IRS to ignore what the law actually says, in an effort to make it workable in a purely political sense - i.e. something the public won't hate even more than it already hates ObamaCare - is "arbitrary, capricious, an abuse of discretion or otherwise not in accordance with the law."





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