NEW YORK (MainStreet) The zombie lawsuits over Obamacare have returned, and they'll be with us for at least one more Supreme Court decision. This must have been what Yale Professor Grant Gilmore meant when he said, "in Hell there will be nothing but law and due process will be meticulously observed."
The most recent infernal trial arose in Halbig v. Burwell. Tuesday afternoon the D.C. Circuit court made news when it struck down a portion of the Affordable Care Act in a party line, 2-1 decision. The majority held that the federal government may only provide insurance subsidies for enrollees under state-run exchanges.
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Anyone who lives in a state that uses the federal marketplace is ineligible. The court based its decision on a sentence in the health care law from paragraph 36B(c)(2)(A)(i), which says that tax credits are available "to individuals who purchase health insurance through marketplaces... that are 'established by the State.'" State means state alone, according to Judge Thomas Griffith's opinion, so federal enrollees cannot apply.
If the ruling stands it will strip insurance subsidies from approximately 4.5 million people across the 27 states that use the federal marketplace. The impact on joint federal-state partnership exchanges remains unclear; however, a Politico estimate says that by 2016 this decision could cost an estimated 7.3 million people their ability to buy health insurance.
Fortunately, that's probably not going to happen. Here's why. While much will be written about this decision, as a lawyer, I think the issue boils down to a standard rule of administrative law called Chevron deference. Taken from the case Chevron U.S.A. v. NRDC, Inc., this rule requires courts to uphold an agency's reasonable interpretation of ambiguous laws. The logic is that agencies, such as the IRS, are subject matter experts and so deserve deference over their areas of responsibility. It's what lawyers call a "reasonableness test": as long as the agency's interpretation is reasonable, the court must uphold it.
Halbig addresses tax code enforcement. The IRS has extended the ACA subsidy to all exchange enrollees both federal and state. The D.C. Circuit has pulled one sentence out of 2,400 pages to say that no one could reasonably interpret the statute this way. According to Judge Griffith's opinion, it is both necessary and clear that the ACA limits subsidies to states with local exchanges.
At the risk of overstating my argument, this is baloney. Of course, the IRS could reasonably have interpreted the law to mean what everyone else in America thinks it means, and that's all that matters.
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The first clue should be the fact that the D.C. Circuit had to reach for one poorly worded sentence out of a massive document to justify its decision. When someone tells you that a single obscure word choice changes the meaning of a law as sweeping as the ACA it's time, as my old Constitutional Law professor says, to check for your wallet. It is incredibly unlikely that Congress, intending to reverse the generally understood meaning of the insurance subsidies, did so in such a discrete manner.
The D.C. Circuit's ruling also renders an absurd result. If the court is correct, then Congress simultaneously requires health insurance without giving people the means to pay for it. It forces insurance companies to cover people who can't pay, building the potential for chaos right into the system from the start. It's a general rule of statutory interpretation to avoid any reading of a law that leads to madness and the idea that Congress would have built a self-destruct button into the ACA is nuts.
Nor does the statute itself support this reading. Frequently throughout the text the term "established by the State" is used in a context that clearly, even unambiguously, includes the federal government. The law requires all states to establish an exchange, and much of the text appears to have been drafted under the assumption that local governments would comply. The federal marketplace was created only as a backup plan, and the ACA treats it as standing in the shoes of state programs that should have been set up in the first place.
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Furthermore, even under a reading most sympathetic to Judge Griffith's opinion, nobody has argued that this passage specifically says federal enrollees are ineligible for subsidies.
The court assumes that the law's silence on the issue limits subsidies only to state exchanges, but that's a not a necessary result. It could just as easily have decided that the law doesn't stop the IRS from extending subsidies to federal enrollees, making everyone eligible.
I could go on, but proving the D.C. Circuit wrong isn't the point. Although I believe that Judges Griffith and Arthur Randolph read the statute wrong, neither my nor their interpretation counts. Section 36B(c)(2)(A)(i) could reasonably be read either literally or in context. What matters is that this is a legitimate debate over a poorly drafted section of the Affordable Care Act.
That's what the next court will consider, whether this goes to the D.C. Circuit en banc or straight to the Supreme Court (where it is inevitably headed anyway). On appeal the judges won't decide who's right or wrong; they'll ask whether the law is ambiguous enough to merit deference to the enforcing agency. Since the IRS didn't read the statute unreasonably, 30 years of case law says that it should win.
Of course, it will probably be a 5-4 decision anyway.
--Written for MainStreet by Eric Reed, a freelance journalist who writes frequently on the subjects of career and travel. You can read more of his work at his website www.wanderinglawyer.com.