ObamaCare’s Latest Legal Challenge
Can the White House simply declare that the federal government is the 51st state?
March 23, 2014 6:08 p.m. ET
A defining feature of President Obama’s second term is his willfulness in defying limits on executive power to suit his political goals, and no more so than with the Affordable Care Act. The judiciary is the last check on those abuses, and this week it will have another opportunity to vindicate the rule of law.
On Tuesday the D.C. Circuit Court of Appeals will hear one of the more important legal challenges to ObamaCare’s lawless implementation. Unlike the challenge to the individual insurance mandate, Halbig v. Sebelius involves no great questions of constitutional interpretation. The plaintiffs are merely asking the judges to tell the Administration to faithfully execute the plain language of the statute that Congress passed and President Obama signed.
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.
Prior to passage, Democrats were divided over the structure of the exchanges, with liberals favoring a national clearinghouse and moderates state control. The federalists won and conditioned the subsidies on state-based exchanges.
This was no accident. The federal government cannot commandeer the sovereign states under the Constitution, so Democrats created an incentive for Governors to participate voluntarily. If they didn’t cooperate by taking the quid of the exchanges, they would deny their constituents the quo of eligibility to claim billions of dollars worth of benefits. The other Democratic goal was to have the states share in the workload of implementation, instead of concentrating everything within HHS.
But also prior to passage, Democrats were convinced that the ObamaCare opposition would melt away as Americans learned to love the law. That did not happen. Some 34 states opted out, and two others couldn’t meet all the HHS mandates by deadline. So the Administration faced a choice: HHS could either obey the law, deny subsidies to the two-thirds of the U.S. population living in states with federal exchanges and thus greatly diminish Mr. Obama’s legacy project. Or it could improvise a workaround—which is what it did.
In 2012, HHS and the Internal Revenue Service arrogated to themselves the power to rewrite the law and published a regulation simply decreeing that subsidies would be available through the federal exchanges too. The IRS devoted only a single paragraph to its deviation from the statute, even though the “established by a State” language appears nine times in the law’s text. The rule claims that an exchange established on behalf of a state is a “federally established state-established exchange,” as if HHS is the 51st state.
Careful spadework into ObamaCare’s legislative history by Case Western Reserve law professor Jonathan Adler and Michael Cannon of the Cato Institute has demonstrated that this jackalope rule-making was contrary to Congress’s intent. For example, the bill appropriated a mere $304 million for HHS to run exchanges. The actual cost turned out to be $3.3 billion as state after state dropped out.
But legislative intent is irrelevant in matters of statutory interpretation. All that matters is the plain meaning of the words of the law. In administrative law, agencies are granted wide deference to interpret and resolve ambiguous statutes under the Chevron v. Natural Resources Defense Council standard, but here the text is clear, consistent and tightly worded: Subsidies in state-based exchanges only. There is also the so-called Yazoo standard, from a 1899 case, that holds that tax benefits “must be expressed in clear and unambiguous terms” and “unquestionably and conclusively” established.
This is meant to protect taxpayer rights and the integrity of the Treasury, which the IRS and HHS are eviscerating. If the Administration can rewrite the law, why not extend subsidies to, say, people whose incomes are currently too high to qualify? As it happens, though ObamaCare says subsidies will only be available to people who enroll through an exchange, HHS has already unilaterally extended subsidies to people who enroll outside of an exchange to compensate for its botched rollout.
The Administration’s dozens of ObamaCare rewrites and delays have gone mostly unchallenged because they tend to insulate people from harm and thus no one has standing to sue. But the availability of subsidies triggers liability for other ObamaCare penalties, such as the individual and employer mandates. Thus in this case the HHS-IRS rule injures people who would otherwise be exempt.
Federal judge Paul Friedman, a Clinton appointee, ruled in favor of the Administration in January. But the three-judge D.C. Circuit panel may be another story. It includes Judges Thomas Griffith (a George W. Bush nominee), A. Raymond Randolph ( George H.W. Bush ) and Harry Edwards ( Jimmy Carter ). The fear of an adverse panel ruling is one reason that Senate Democrats broke the filibuster rule to pack the D.C. Circuit with three more liberals this year. If the Administration loses at the panel level, it will ask for an en banc ruling that it thinks it will win and thus delay any Supreme Court judgment by many months.
Fear of legal defeat also explains why the Administration is suddenly claiming that the appeals court lacks the jurisdiction to invalidate its interpretation of ObamaCare. Last week the Justice Department submitted a so-called 28(J) letter, declaring that because Halbig is not a class action, any adverse ruling only applies to the named plaintiffs.
In other words, even if the court finds that the Administration is acting illegally, it cannot strike down the IRS-HHS rule and the executive branch will continue to ignore both Congress’s law and the law of the courts. There are few if any precedents for such a remarkable argument.
After Chief Justice John Roberts upheld ObamaCare, the refrain on the political left was “it’s the law,” but the last year has proven that the White House thinks the law is whatever it says it is. Mr. Obama has conceded that “obviously we didn’t do a good enough job in terms of how we crafted the law.” The right and only lawful way to repair ObamaCare is through another act of Congress. In Halbig, the judiciary can remind the Obama Administration of this basic constitutional truth.