Consider This A Warning: A New Legal Threat to Obamacare Brewing in the D.C. Courts?

Thomas Warns*

This week, the most important Affordable Care Act case since NFIB v. Sebelius is being argued in a Washington, D.C. courtroom. While the Supreme Court is hearing oral arguments in Sebelius v. Hobby Lobby, a case which touches on important notions of individual liberty, free exercise of religion, and corporate rights, the far more important case is being argued in the D.C. Circuit Court of Appeals: Halbig v. Sebelius (side note: does anyone get sued as often as poor Kathleen Sebelius?).

What makes the Halbig case such a big deal? Unlike Hobby Lobby, it actually has the potential to upend the entire law. The Wall Street Journal summed up the case succinctly:

The Affordable Care Act—at least the version that passed in 2010—instructed the states to establish insurance exchanges, and if they didn't the Health and Human Services Department was authorized to build federal exchanges. The law says that subsidies will be available only to people who enroll "through an Exchange established by the State." The question in Halbig is whether these taxpayer subsidies can be distributed through the federal exchanges, as the Administration insists.

This new challenge to the Affordable Care Act could eliminate subsidies for people signing up through the 34 federally-run healthcare exchanges. A recent estimate from the Department of Health and Human Services indicates around 85% of people signing up through federal exchanges receive a subsidy of some kind; it’s no wonder that one supporter of the law commented “probably the most significant existential threat to the Affordable Care Act.”

Surely this was a mistake in language that was overlooked? No, the wording was intended by Congress. The anti-commandeering principle, reaffirmed by the Supreme Court in New York v. United States, states that the federal government may not commandeer the sovereign state governments and force them to undertake a federal regulatory regime. Thus, the federal government would have run afoul of this unquestioned principle if it required the states to set up exchanges. Instead, they offered subsidies as an incentive for the states to set up their own healthcare exchanges.

At the District Court level, the judge sided with the government and stated that the clear language about the subsidies for state exchanges was essentially surplusage. The judge indicated that he was interpreting the law in this way in order to preserve the central purpose of the ACA, which was to provide low cost healthcare to all Americans, and further that his reading of the ACA was the one compelled by the law. But as Jonathan Adler (who first raised this issue with the law last year) points out, the text of the law indicates that the federal government wanted the states to set up their own exchanges, and that the subsidies were just one of the ways the law encouraged the states to act. Legislative history also shows that it was not oversight that there were no subsidies for federal exchanges, but that it was an active issue proposed by two Democrats that supported the ACA and wrote amicus briefs for the government in this case.

The three judge panel of the D.C. Circuit Court hearing this case includes a George W. Bush appointee, a George H.W. Bush appointee, and a Jimmy Carter appointee, which seems favorable to the plaintiffs. If the government loses however, they could ask for an en banc review by the entire D.C. Circuit, which would likely be more favorable – if you recall, the Senate recently rewrote the filibuster rules in order to fill several vacant seats in that Circuit with liberal judges. Whether the case ever reaches the Supreme Court remains to be seen, however the longer that takes the better for supporters of the ACA; the more entrenched the law becomes, the harder it will be to remove.

The Affordable Care Act has been marked by lawless implementation for years now. The President and his executive agencies have altered, modified, and delayed important aspects of the law unilaterally so many times now that one almost forgets it was a law passed by Congress, just like any other law. The House Ways and Means Committee investigated this decision by the IRS and HHS to include subsidies in spite of the law’s text, and found it would cost taxpayers $500 billion over the next decade. The judiciary should do its part, and enforce the law as Congress passed it, not as the President and his agents would like it to be. Considering the chorus of smug commenters from the left shouting “It’s the law!” it only seems fair that those on the right tell their liberal friends be careful what you wish for because right now it is the liberals who are desperately avoiding enforcement of the law. 

*Thomas Warns is a J.D. Candidate, class of 2015, at NYU School of law, Staff Editor on the NYU Journal of Law & Liberty , and author of the weekly column "Consider This a Warning."