A federal appeals court ruled Tuesday that government subsidies should be cut off for millions of lower-income folks who are getting help paying their Affordable Care Act bills.
If the ruling stands, it would mean healthcare under the ACA would become unaffordable for millions. Basically, it would sound the death knell for the law.
But just a few hours later, a different federal appeals court upheld the very same subsidies.
The trouble is in the way the law is written, according to multiple published reports.
The law says that subsidies should be paid to those who purchase insurance through “an exchange established by the state.” That would seem to leave out the 36 states that don’t have state exchanges. In those states, people purchase ACA plans through healthcare.gov, which is operated by the federal government.
“We conclude that the ACA unambiguously restricts the (authorized) subsidy to insurance purchased on exchanges ‘established by the state,’” said the judge writing for the majority in the ruling against.
But the judges on the other appeals court ruled the law was “ambiguous and subject to multiple interpretations” and ruled in favor of the law.
So which is it?
Well, not surprisingly, Republicans are saying the “against” ruling is correct and Democrats say the “for” ruling is correct.
But none of the political prattle really matters anyway, because these rulings create a clear conflict regarding a critically central component of the ACA that will likely wind up in the lap of the U.S. Supreme Court. And, again, Chief Justice John Roberts will likely cast the deciding vote, just like he did in the original lawsuit challenging the individual mandate and the now-famous Hobby Lobby contraception mandate.
So how will the high court rule? Who knows? But it’s fun to analyze.
The law clearly states that subsidies can be granted only to those who purchase insurance through “an exchange established by the state.”
Apparently nobody really cared about the glitch until well after the law was passed. That’s likely because most in the administration figured all the states would establish exchanges.
If that happens, the wording with regard to subsidies is no big deal. But, as it turned out, 36 states didn’t establish exchanges.
In 2012, as the ACA was rolling out, the Internal Revenue Service noticed the glitch and adopted a regulation to fix it.
The new IRS regulation said that individuals who qualified for subsidized insurance that is purchased on a government-run exchange may receive a tax credit, “regardless of whether the exchange is established and operated by a state.”
(Here’s a thought. The “for” ruling said the law was ambiguous and didn’t need fixing. Cleary, government lawyers at IRS thought otherwise. They felt compelled to establish a regulation to make the subsidies pass muster. Did the IRS just get it wrong? Because, why would the IRS adopt a regulation to fix a problem that didn’t need to be fixed?)
And therein lies the crux of the problem for the Obama administration and the ACA.
I read an interesting piece in thefiscaltimes.com about this. In it, President Obama’s Harvard law professor Laurence Tribe said the following:
“I don’t have a crystal ball. But I wouldn’t bet the family farm on this coming out in a way that preserves Obamacare.”
That’s because, as opponents of the ACA, like Michael Cannon of the Cato Institute claim, the IRS does not have the authority to make changes like that.
“There are specific rules about when and how the IRS can deviate from the plain language of a statute,” Cannon told the National Review online.
He said the IRS can deviate from “absurd” laws but the subsidies language is not absurd. He also said the IRS can deviate from scrivener’s errors, – typos – but this is no typo, because it was written into repeated drafts of the ACA.
“They not only keep that language in there, but they even inserted it, this same phrase again, right before passage while the bill was in [Senate Majority Leader] Harry Reid’s office,” Cannon says. “So, it’s not a scrivener’s error, either.”
Finally, Cannon said, the IRS could fill in ambiguous gaps in a law. But he argues the subsidies language is far from  ambiguous.
If this goes to the Supreme Court, Cannon seems to think that Chief Justice Roberts won’t be able to find out a way to uphold the law as he did with regard to the individual mandate.
“That was a question of congressional power under the Constitution, and this is a question of IRS power under the ACA and Supreme Court precedents,” Cannon told National Review online. “The IRS has absolutely zero independent power to tax and borrow and spend. It can only do that which is delegated to it by Congress.”
Beyond that, Cannon, writing for healthaffairs.org when the case was first argued in March, notes that:
The statutory eligibility rules for the ACA’s premium-assistance tax credits clearly say that eligibility depends on the applicant being enrolled in a qualified health plan “through an exchange established by the State.” The rules employ that restrictive phrase nine times, without deviation. Since the Act explicitly ties its cost-sharing subsidies, employer-mandate penalties, and (in many cases) individual-mandate penalties to the availability of these tax credits, it therefore also authorizes those provisions only in states that establish exchanges. Congress simply did not authorize those spending and revenue measures in the 34 states that opted for a federal exchange.
This condition was not a fluke or a drafting error. Congress routinely conditions individual entitlements to health-insurance subsidies (including refundable tax credits) on state cooperation with federal requirements ...  In the ACA’s legislative history, both Republicans and Democrats introduced legislation conditioning various subsidies on states establishing an exchange.
I think guys like Cannon make some pretty salient points with regard to this latest ACA snafu.
But, of course, the other side thinks it’s all bunk:
“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,” said Josh Earnest, the White House press secretary. “I think that is a pretty clear intent of the congressional law.”
A Justice Department spokeswoman, Emily Pierce, told the New York Times: “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.”
So is the ACA ambiguous with regard to subsides or not? The short answer is, I don’t know.
But one thing is clear to me. Win or lose, one side or the other will push this to the Supreme Court, and then – in a year or so – we’ll all know.
And, finally, why is this such a big deal anyway? Can’t the president just sign an executive order spelling out how he wants the law to read?