D.C. Circuit guts ObamaCare

[DinoDoc]

BREAKING — D.C. Circuit strikes down tax credits in federal exchanges

This morning the U.S. Court of Appeals for the D.C. Circuit released its much awaited opinion in Halbig v. Burwell. In a 2-1 opinion, the Court held that the Internal Revenue Service regulation authorizing tax credits in federal exchanges was invalid. Judge Griffith, writing for the court, concluded, “the ACA unambiguously restricts the section 36B subsidy to insurance purchased on Exchanges ‘established by the State.” In other words, the court reaffirmed the principle that the law is what Congress enacts — the text of the statute itself — and not the unexpressed intentions or hopes of legislators or a bill’s proponents. Judge Randolph joined Judge Griffith’s opinion and wrote a concurrence. Judge Edwards dissented. The opinions are available here.

Here is the introduction to Judge Griffith’s opinion:

Section 36B of the Internal Revenue Code, enacted as part of the Patient Protection and Affordable Care Act (ACA or the Act), makes tax credits available as a form of subsidy to individuals who purchase health insurance through marketplaces—known as “American
Health Benefit Exchanges,” or “Exchanges” for short—that are “established by the State under section 1311” of the Act. 26 U.S.C. § 36B(c)(2)(A)(i). On its face, this provision authorizes tax credits for insurance purchased on an Exchange established by one of the fifty states or the District of Columbia. See 42 U.S.C. § 18024(d). But the Internal Revenue Service has interpreted section 36B broadly to authorize the subsidy also for insurance purchased on an Exchange established by the federal government under
section 1321 of the Act. See 26 C.F.R. § 1.36B-2(a)(1) (hereinafter “IRS Rule”).

Appellants are a group of individuals and employers residing in states that did not establish Exchanges. For reasons we explain more fully below, the IRS’s interpretation of section 36B makes them subject to certain penalties under the ACA that they would rather not face. Believing that the IRS’s interpretation is inconsistent with section 36B, appellants challenge the regulation under the Administrative Procedure Act (APA), alleging that it is not “in accordance with law.” 5 U.S.C. § 706(2)(A).

On cross-motions for summary judgment, the district court rejected that challenge, granting the government’s motion and denying appellants’. See Halbig v. Sebelius, No.
13 Civ. 623 (PLF), 2014 WL 129023 (D.D.C. Jan. 15, 2014). After resolving several threshold issues related to its jurisdiction, the district court held that the ACA’s text,
structure, purpose, and legislative history make “clear that Congress intended to make premium tax credits available on both state-run and federally-facilitated Exchanges.” Id. at *18. Furthermore, the court held that even if the ACA were ambiguous, the IRS’s regulation would represent a permissible construction entitled to deference under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).

Appellants timely appealed the district court’s orders, and we have jurisdiction under 28 U.S.C. § 1291. Our review of the orders is de novo, and “[o]n an independent review of the record, we will uphold an agency action unless we find it to be ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.’” Holland v. Nat’l Mining Ass’n, 309 F.3d 808, 814 (D.C. Cir. 2002) (quoting 5 U.S.C. § 706(2)(A)). Because we conclude that the ACA unambiguously restricts the section 36B subsidy to insurance
purchased on Exchanges “established by the State,” we reverse the district court and vacate the IRS’s regulation.

Although this decision is faithful to the text of the PPACA – that is, faithful to the text Congress actually enacted, as opposed to the health care reform some wanted or now wish they had gotten — it will provoke howls of outrage from ACA supporters. (Let the disdain campaign begin.)

What comes next? The Administration will have to decide whether to seek en banc review of this decision or file a petition for certiorari. If I had to guess, I would say the former is more likely. Supreme Court review will likely wait until there are more decisions on this question. A decision remains pending in King v. Sebelius before the U.S. Court of Appeals for the Fourth Circuit and there are two pending cases in district courts.

If this decision is upheld, it will present some three-dozen states with a choice: Establish exchanges so as to authorize tax credits for state citizens while also triggering penalties on employers and individuals who do not wish to purchase qualifying health insurance. As my co-author Michael Cannon notes, the implications of this decision go beyond its effect on tax credits. How will states respond? Time will tell. As with the Medicaid expansion, it is not entirely clear how states will react now that so much of PPACA implementation is clearly in their hands.

Background on the case can be found here.

I will have additional posts on this decision later today.

http://www.washingtonpost.com/news/...trikes-down-tax-credits-in-federal-exchanges/

Wow. I honestly didn't expect them to adhere to the text of the law in this instance.

 

[Rashiminos]

I thought the literal constructionists had gone extinct.

 

[Ziggy Stardust]

Obamacare is so last election.

 

[DinoDoc]

I thought the literal constructionists had gone extinct.

I know. It makes me glad to see that they still exist.

 

[Azale]

You're like the sports fan who only shows up when his team is winning. Good to see conservative judicial activism is still alive and well though, it's about all they've got left.

Kaiser Health News

Appeals Court Strikes Down Subsidies In Federal Health Exchange
Print Share
TOPICS: HEALTH REFORM, STATES, POLITICS, MARKETPLACE, INSURANCE

By Julie Rovner
KHN Staff Writer
JUL 22, 2014

A three-judge panel at the U.S. Appeals Court for the D.C. Circuit threw the fate of an important part of the Affordable Care Act into doubt Tuesday. In a 2-1 decision in Halbig v. Burwell, the judges ruled that the Internal Revenue Service lacked the authority to allow subsidies to be provided in exchanges not run by the states. That could put at immediate risk the millions of people who bought insurance in the 36 states where these online insurance marketplaces are run by the federal government.

“Because we conclude that the ACA unambiguously restricts the section 36B subsidy to insurance purchased on the Exchanges ‘established by the state,’ we reverse the district court and vacate the IRS’s regulation,” said the decision by Judge Thomas Griffith.

Meanwhile, just an hour later, another three-judge panel on the 4th Circuit Court of Appeals in Richmond, Va., came to the opposite conclusion – upholding the federal subsidies.

“It is therefore clear that widely available tax credits are essential to fulfilling the Act’s primary goals and that Congress was aware of their importance when drafting the bill,” said the decision written by Judge Roger Gregory.

The Obama administration said it will appeal the Halbig decision. The Justice Department will ask the entire appeals court panel to review the decision, and that panel is dominated by judges appointed by Democrats, 7-4. The issue is also in other courts around the country.

White House spokesman Josh Earnest said: “There's a lot of high-minded case law that's applied here. There's also an element of common sense that should be applied as well, which is that you don't need a fancy legal degree to understand that Congress intended for every eligible American to have access to tax credits that would lower their health care costs, regardless of whether it was state officials or federal officials who were running the marketplace.”

‘’We believe that this decision is incorrect, inconsistent with Congressional intent, different from previous rulings, and at odds with the goal of the law: to make health care affordable no matter where people live. The government will therefore immediately seek further review of the court’s decision,” said a statement from the Justice Department.

Meanwhile, Elizabeth Wydra, chief counsel for the Constitutional Accountability Center said the ruling wouldn’t take effect right away. “The court’s rules are that it doesn’t happen for 45 days,” to give the government time to ask for a full en banc hearing, “or 7 days after the en banc hearing has been denied.”

Should the decision eventually stand, however, it could mean at least five million Americans would face an average premium increase of 76 percent, according to a projection done by the consulting firm Avalere Health.

The court said that the wording of the health law “plainly makes subsidies available only on Exchanges established by states,” and that the legislative history of the bill “provides little indication one way or the other of congressional intent.”

But Judge A. Raymond Randolph offered a strong dissent. “It makes little sense to think that Congress would have imposed so substantial a condition in such an oblique and circuitous manner.”

The case could end up in the Supreme Court.

Ezra Klein from Vox

No, the Halbig case isn't going to destroy Obamacare
Updated by Ezra Klein on July 22, 2014, 12:40 p.m. ET @ezraklein

The Halbig case could destroy Obamacare. But it won't. The Supreme Court simply isn't going to rip insurance from tens of millions of people in order to teach Congress a lesson about grammar.

As Adrianna McIntyre explains, the Halbig case holds that Obamacare's subsidies are illegal in the 36 states where the federal government runs (or partly runs) the exchange. The plaintiffs rely on an unclearly worded sentence in the law to argue that Congress never intended to provide subsidies in federally-run exchanges and so the subsidies that are currently being provided in those 36 states are illegal and need to stop immediately.

This is plainly ridiculous. The point of Obamacare is to subsidize insurance for those who can't afford it. The point of the federal exchanges is to make sure the law works even in states that can't or won't set up an exchange. For Congress to write a law that provides for federal exchanges but doesn't permit money to flow through them would have been like Congress writing a transportation law that builds federal highways but doesn't allow cars, bikes or buses to travel on them.

That was...not what Congress thought it was doing. As Jonathan Cohn writes, "not once in the 16 months I reported on the formal congressional debate did any of the law's architects suggest they were thinking along these lines." My experience was precisely the same: architects of the bill underestimated how many states would let the federal government run their exchanges, but they always thought there would be a few, and they always assumed those exchanges would feature subsidies. Everyone in Congress — including the Congressional Budget Office in its estimates of Obamacare's cost — assumed subsidies would flow through federal exchanges.

The bill's authors have said as much in public. Obamacare wasn't written by Barack Obama. Its primary author was (former) Senator Max Baucus. Back in July 2012, his then-sokesman, Sean Neary, told Sarah Kliff that "the clear intention of the health-care law is to provide consumers with tax credits to purchase quality, affordable health coverage through either a state or a federally-facilitated exchange."

Bad grammar makes courts [sic]

But the conservative lawyers and health-policy experts behind the case — shout out to Michael Cannon and Jonathan Adler, who have worked tirelessly and ingeniously to make Halbig happen — are right about one thing: whatever Congress's intention, the key sentence in the law was drafted poorly. Section 1401 of the law says that subsidies will be extended to people who buy an insurance "through an exchange established by the state." That seems to say that subsidies only run through state exchanges.

The government's argument is that Section 1321, which sets up federal exchanges, says that when states fail to construct an exchange the federal government shall "establish and operate such Exchange within the State and the Secretary shall take such actions as are necessary to implement such other requirements.."

The key word there is "such": the Obama administration holds that the clear intent of that line was that a federal exchange counts as a state exchange for the purposes of the law. That may be a bit confusing — but given the context of everything else in the law, it's clear enough.

The Halbig argument has been rejected by district courts already. But today, a three-judge panel on the D.C. Circuit Court ruled for Halbig (full decision here). The decision broke, as these decisions often do, on party lines: the two Republican-appointed judges ruled against the administration and the judge appointed by Democrats ruled for the administration. That decision is expected to be reversed when the Obama administration asks for an en banc hearing, in which the full D.C. Circuit Court hears the case: most of the judges are Democratic appointees. But that probably won't happen until the fall. In the meantime the law will continue on as normal.

For Halbig to unwind Obamacare the Supreme Court would ultimately have to rule in the plaintiff's favor. And they're not going to do that. By the time SCOTUS even could rule on Halbig the law will have been in place for years. The Court simply isn't going to rip insurance from tens of millions of people due to an uncharitable interpretation of congressional grammar.

For five unelected, Republican-appointed judges to cause that much disruption and pain would put the Court at the center of national politics in 2015 and beyond. It would be a disaster for the institution. Imagine when the first articles come out recounting the story of someone who lost their insurance due to the SCOTUS ruling and then died because they couldn't afford their diabetes or cancer treatment. Imagine when every single Democrat who had any hand at all in authoring the law says the Court is completely wrong about what the law meant. Imagine when every single Democrat runs against the Court.

Chief Justice John Roberts realized that in 2012 when he ruled the individual mandate constitutional. All evidence suggests he didn't want to rule the mandate constitutional. But he thought it would harm the Court to do otherwise. Deciding for the plaintiffs in Halbig would do far more damage to the law than striking down the mandate and it would do so when the law is actually providing insurance to people. It's not going to happen.

Please, try and reverse ACA through the Supreme Court again. Try your damndest.

 

[Kaitzilla]

Wow.
Subsidies are a huge part of Obamacare!

http://www.vox.com/2014/7/22/5821600/obamacare-halbig-subsidies-illegal-most-states

Why a federal court just ruled Obamacare subsidies are illegal in 36 states


Halbig v. Burwell is arguably the Affordable Care Act's greatest existential threat since the Supreme Court case decided in 2012.

On July 22, the U.S. Court of Appeals for the D.C. Circuit issued a ruling against the federal government that threatens health insurance subsidies in over thirty states. You can read the opinion here.

Without subsidies, health reform could fall apart. That makes this court case a bigger deal than GOP efforts to repeal Obamacare. There have been over 40 repeal votes since the law was passed, but they've always been toothless: even if repeal made it through Congress, President Obama promised to veto any legislation that dismantled his signature legislation.

But this court case is out of Congress's hands — and out of President Obama's, too.

I wouldn't panic just yet.
I'm sure the Supreme Court will broaden the definition of "exchanges established by the State" to make the federal government a state.
Whatever mental gymnastics made Obamacare a tax.

Due to what appears to many outside observers to have been poorly-crafted legislative language, Congress wrote a sentence that arguably provides subsidies exclusively to state-based exchanges and not to federally-facilitated ones, even while subjectively intending to provide subsidies in both cases. Yet, even though this is what many people who followed the legislation think happened — largely because the law was passed through an unorthodox budgetary process and never went to conference committee, where messy drafting gets cleaned up — neither side is asserting that there is a "mistake" in the way the law was written.

Congress

Passing things without reading them is really starting to bite us in the @^!

If the IRS makes poor people in 36 states pay the subsidies back there will be riots.

 

[Kaitzilla]

Obamacare is so last election.

But we are only now founding out what was in it, so it remains in the news

http://blog.acton.org/archives/70936-skirting-law-five-u-s-territories-now-exempt-obamacare.html

Skirting The Law: Five U.S. Territories Now Exempt From Obamacare



Last week was a busy one, news-wise, and this may have slipped by you. Suddenly, 4.5 million people in the 5 U.S. territories (American Somoa, Guam, Northern Mariana Islands, Puerto Rico and the U.S. Virgin Islands) are now exempt from Obamacare. Just like that.

What’s the story? Obamacare costs too darn much, and insurance providers were fleeing the U.S. territories, leaving many without insurance or at least affordable insurance. These territories have spent the last two years begging to get out from under this law, only to be told the Department of Health and Human Services has no legal authority to exclude the territories” from ObamaCare. HHS said the law adopted an explicit definition of “state” that includes the territories for the purpose of the mandates and the public-health programs, and another explicit definition that excludes the territories for the purpose of the subsidies. Thus there is “no statutory authority . . . to selectively exempt the territories from certain provisions, unless specified by law.”

Laws, let us remember, are made by Congress. Unless they’re not. For instance, last week, the Department of Health and Human Services said they’d reviewed the situation and the territories will now be governed by the “state” definition that excludes the territories for both the subsidies and now the mandates too. But the old definition will still apply for the public-health spending, so the territories will get their selective exemption after all.

As the Wall Street Journal notes, there seems to be some elasticity in the White House’s definition of “state.” And, may I add, some elasticity in the democratic process, the Constitution and rule of law

So for 2 years the law absolutely applied to them.
Then the Health and Human Services decided that it didn't.

 

[DinoDoc]

You're like the sports fan who only shows up when his team is winning. Good to see conservative judicial activism is still alive and well though, it's about all they've got left.

Can you explain what is activist about interpreting the law as it was written? Seriously, you write bad laws, you get bad laws. This is merely the ACA as it was written. The solution here is a Congressional fix or for the States to create their own exchanges. Not for the Executive branch to rewrite the actual text of the law passed by Congress.

 

[warpus]

I am convinced that America is broken as a country and that you guys just need to start from scratch. New founding fathers, new constitution, everything.

I realize that this is going to be a very unpopular post, but it's just how I feel. Your country is a mess.

 

[KMRblue1027]

I am convinced that America is broken as a country and that you guys just need to start from scratch. New founding fathers, new constitution, everything.

I realize that this is going to be a very unpopular post, but it's just how I feel. Your country is a mess.

I completely agree, and I think it was Franklin got what he wanted we would have. He was supporting writing a new constitution every 50 years so the last one would have been created in '89.

 

[DinoDoc]

Wow.
Subsidies are a huge part of Obamacare!

I'm curious, if this stands, would the individual mandate die in those states that neglected or failed to set up their own exchanges?

 

[warpus]

I completely agree, and I think it was Franklin got what he wanted we would have. He was supporting writing a new constitution every 50 years so the last one would have been created in '89.

That sounds interesting, I wonder if any other country does it like that?. I think the Canadian constitution was rewritten a couple decades ago, but I can't be sure. We have nothing written down in law that requires us to do such a thing, I think it was just out of date.

And really.. doesn't every constitution reach a stage where it is up to date? And sure, they can be amended, but how often does that happen?

I wonder what sort of political craziness would erupt each 50 years though.

 

[Joecoolyo]

I wonder what sort of political craziness would erupt each 50 years though.

Imagine all the crazy ideas actually getting solidified into law for 50 years, I think we'd be far worse off.

Much rather have an older constitution that's vague enough that we can argue about the legality of crazy laws. At least there we have an avenue to defeat them.

 

[Antilogic]

I am convinced that America is broken as a country and that you guys just need to start from scratch. New founding fathers, new constitution, everything.

I realize that this is going to be a very unpopular post, but it's just how I feel. Your country is a mess.

Look around at some of the posters on this forum and people in our media. Do you really want them drafting a new constitution?

 

[warpus]

Look around at some of the posters on this forum and people in our media. Do you really want them drafting a new constitution?

Good point.

The way things are now it'd likely be written by lobbyists for large corporations and some Darth whoever guy who rules the NSA.

 

[Kennigit]

Ruh roh, department of state in danger!

 

[Serutan]

I completely agree, and I think it was Franklin got what he wanted we would have. He was supporting writing a new constitution every 50 years so the last one would have been created in '89.

Just about all of the delegates to the Constitutional Convention looked on
their handiwork as a 'first cut' to be tested out for 25-50 years, then rewritten
to correct the (in their opinion) inevitable flaws discovered. That this didn't happen
is partially due to the amendment mechanism, but also because Congress
will never call a convention to modify the Constitution knowing what happend in 1787.

 

[civvver]

I think it's a good decision, congress made their bed, now lie in it. Don't you guys remember the outrageous pelosi quote, we have to pass the bill to find out what's in it? Taken way out of context as far as I know, but still seems to be the general attitude of congress who never fully read anything.

 

[DaveShack]

Fortunately, or unfortunately depending on your point of view, the law is all about the language. This caused endless fun in democracy games on CFC, with never ending battles between those who wanted to put as little language in the law as possible vs. those who wanted everything to be explicit as possible.

 

[GoodSarmatian]

I TOO AM GLAD THAT AMERICANS WILL AGAIN HAVE THE FREEDOM TO CHOOSE BETWEEN BANCRUPTCY AND DEATH !!!

Ffs, the more I read about american politics the more I am convinced that the US constitution was a good idea 200 years ago and is totally inadequate for a modern country.
Repeal and replace.