Obamacare back to the Supreme Court

Opponents of Obamacare are going to get one more bite of the apple to gut the law, and perhaps destroy it.

At issue: What was the intent of Congress when they approved taxpayer subsidies for the state exchanges?  Congress - in plain language - limited subsidies to the exchanges only and did not grant the federal Obamacare website - healthcare.gov - the power to grant subsidies to consumers who purchased their policies through the site.

But the IRS ignored the intent of Congress and issued a rule that taxpayers could receive subsidies through the federal exchange.

Supporters of Obamacare claim that Congress erred in drafting the language of the bill. But a cursory examination of the record shows that it was the intent of Congress to encourage states to set up insurance exchanges and deny the federal exchange the ability to offer subsidies.

Lyle Denniston offers further clarification:

The new case appears to be as important to the functioning of the ACA, as it emerged from Congress in 2010, as was the mandate that every individual in the nation (with few exceptions) had to obtain health insurance by this year, or pay a financial penalty.  The Supreme Court in June 2012 rejected a challenge to the individual mandate, finding that the arrangement Congress had made was a valid tax scheme.  No one absolutely had to buy insurance, but those who did not would face a penalty as part of their filing of federal tax returns, as the Court viewed the mandate.

That was a decision based on the Constitution.  The question presented by the case that the Court granted Friday is how to interpret legislative language chosen by Congress.  Underlying that issue, however, is the broader question whether the words Congress chooses are to be the sole guide to what a law does, or whether the larger purposes that Congress seems to have in mind should determine how to read the words.

The challengers take the “literal interpretation” approach, although they also have policy reasons for reading the ACA as they do.  The Obama administration takes the “broader purpose” approach, contending that Congress would not have set up the insurance program on a basis that is as limited as the challengers contend.  There are Justices on the Court on both sides of that debate over interpreting federal laws.

The four words primarily in dispute have been interpreted by the Internal Revenue Service, which is in charge of the tax subsidy program, to apply to every exchange across the nation, whether set up by a state or, if a state declined to do so, by the federal government in place of the state.

Here is the question that the petition put before the Court:  “Whether the Internal Revenue Service may permissibly promulgate regulations to extend tax-credit subsidies to coverage purchased through exchanges established by the federal government under section 1321 of the ACA.”

That is essentially the same issue that the D.C. Circuit has agreed to examine en banc.  It is scheduled to hold oral arguments on December 17.  Whether it would go ahead with that review, knowing now that the Supreme Court is going to decide the issue, is unclear at this point.  The challengers would be free, it appears, to ask the D.C. Circuit to hold its case in abeyance during Supreme Court review.

"In setting up the subsidy scheme, Congress said it would apply to exchanges “established by the State," writes Denniston. What Congress meant by those 4 words is the meat of the suit.

It's anybody's guess how this will play out. As Denniston notes, this is not a constitutional issue, but rather an interpretation of congressional intent. But there is history and precedent working against the plaintiffs in this case.

If the Supreme Court declares the Obamacare subsidies obtained through the federal website illegal, millions of people will be unable to afford their policies. The Court rarely allows that kind of market disruption and may issue a ruling that allows states a workaround. Indeed, the clamor to keep millions of people on their subsidized insurance plan no matter where they purchased it might force most states that don't currently have an exchange to grant that power to Washington in order to keep people from losing their insurance.

Joey Fishkin:

There are interesting political questions about what will happen if the King plaintiffs prevail.  I have argued elsewhere, and I continue to believe, that all a state must do to establish a “state exchange” is essentially to pass legislation declaring that it is doing so; the federal government can still in fact run much of the back end.  If King is reversed, it will make for an interesting choice for red states.  Unlike with the Medicaid expansion, there is no plausible veneer of cost-savings for states here: the federal government pays 100% of the cost of the subsidies on the exchanges (as compared with 90%-ish of the costs of the Medicaid expansion).  We will see how many states, in the end, actually block the provision of subsidized insurance to their citizens through the exchanges, pulling untold millions of dollars out of their own economies and health care systems, despite the fact that, (a) unlike the Medicaid expansion, the subsidies are free to the states; (b) unlike in NFIB v. Sebelius, the exchanges are now up and running, so it is a question of taking away the endowment of subsidized insurance of people who currently have it; and (c) the recipients in question are not poor or near-poor, but middle-class and perhaps more politically potent.

So in the end, no matter what the Court rules, it's possible that the subsidy system will survive.