A bigger threat for Obamacare

07/02/2014 5:44 PM

07/02/2014 5:45 PM

Now that the U.S. Supreme Court has issued its ruling in the Hobby Lobby case, the legal fight over the Affordable Care Act will shift a few blocks away to another Washington courtroom, where a far more fundamental challenge to Obamacare is about to be decided by the powerful U.S. Court of Appeals for the D.C. Circuit.

Halbig v. Burwell challenges the massive federal subsidies in the form of tax credits made available to people with financial need who enroll in the program.

In crafting the act, Congress created incentives for states to set up health insurance exchanges and disincentives for them to opt out. The law, for example, made the subsidies available only to those enrolled in insurance plans through exchanges “established by the state.”

But to the great surprise of the administration, some 34 states opted not to establish their own exchanges, leaving it to the federal government to do so.

This left the White House with a dilemma: If only those enrollees in states that created exchanges were eligible for subsidies, a huge pool of people would be unable to afford coverage, and the entire program would be in danger of collapse.

Indeed, the Halbig plaintiffs — individuals and small businesses in six states that didn’t establish state exchanges — objected that, without the tax credits, they could have claimed exemption from the individual mandate penalty because they would be deemed unable to pay for the coverage.

If the courts agree with them, the costs would go up in all 34 states that didn’t establish state exchanges, and the resulting exemptions could lead to a mass exodus from Obamacare.

The administration attempted to solve the problem by simply declaring that even residents of states without their own exchanges were eligible for subsidies, even though the law seemed to specifically say they were not.

The administration argues that although the statute’s language does limit subsidies to residents of places with exchanges “established by the state,” that wording actually referred to any exchange, including those established by the federal government.

In January, a district court judge upheld that interpretation, allowing the subsidies to continue.

But the D.C. Circuit Court may see things quite differently, especially in light of recent Supreme Court opinions holding that the Obama administration has exceeded its authority and violated separation of powers.

In Utility Air Regulatory Group v. EPA, for example, Justice Antonin Scalia, writing for the majority, stressed that “an agency has no power to tailor legislation to bureaucratic policy goals by rewriting unambiguous statutory terms.”

The D.C. Circuit Court is expected to rule any day now on the Halbig case, and supporters of the Affordable Care Act are growing nervous.

If the ruling goes against the White House, it’s hard to overstate the impact.

Halbig could leave Obamacare on life support — and lead to another Supreme Court showdown.

Jonathan Turley is a professor of law at George Washington University. jturley@law.gwu.edu

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