The Obamacare subsidies are on trial

The Obamacare subsidies are on trial

gavelAmid all the blame-shifting and back-and-forth name-calling over the benighted Affordable Care Act, the ever-sensible Sean Trende has an important piece today at Real Clear Politics.

“Last week,” Trende writes, “the most important case that you’ve never heard of survived its first legal hurdle. Judge Paul Friedman of the United States District Court for the District of Columbia ruled that plaintiffs had standing to advance a broadside attack on the subsidy system at the heart of the Patient Protection and Affordable Care Act, colloquially known as Obamacare.”

Trende goes on to note:

The challenge revolves around three provisions in the Affordable Care Act. Section 1311 of the law establishes state insurance exchanges. It provides, in part, that ‘[e]ach State shall . . . establish an American Health Benefit Exchange . . . for the State.’

Of course, Congress can’t actually force states to take such a step, as that would be an unconstitutional commandeering of state governments. While the administration believed that all states would eventually create these marketplaces, the ACA nevertheless provides a backstop in case that didn’t happen: Section 1321 specifies that ‘the Secretary [of Health and Human Services] shall … establish and operate such Exchange within the State and the Secretary shall take such actions as are necessary to implement such other requirements.’

Friedman, the aforementioned judge, is a Clinton appointee but apparently also a jurist who takes his responsibilities and the law seriously. After noting that both sides made credible cases and refusing the plaintiffs’ requests for a temporary injunction, he made it clear that his decision now would in no way impact on his final ruling, which will be handed down on Feb. 15 of next year. If he does rule in favor of enjoining the federal government from making subsidies to the federal exchanges, the law might once again prove unworkable.

Theres’ more:

A related provision deals with the calculation and payment of insurance subsidies. To cushion the blow of the individual mandate to purchase coverage and pay for associated increased costs, the ACA includes ‘premium assistance’ for lower-income taxpayers. These subsidies are available to people whose plans ‘were enrolled in through an Exchange established by the State under section 1311 of the Patient Protection and Affordable Care Act.’

If you’ve been reading carefully, you can see the problem. By its plain text, the ACA only provides for subsidies for people enrolled in an exchange that was (a) established by the state and (b) established under section 1311. (In case you were wondering, the law defines ‘State’ as ‘each of the 50 States and the District of Columbia.’) This is the argument, in a nutshell, of those bringing the lawsuit. If you live in, say, Oklahoma, which didn’t set up an exchange, the ACA doesn’t appear to offer a mechanism for you to receive any subsidies.

If you’re an opponent of Obamacare, you’re probably nodding along vigorously. This case is made all the stronger because we’re talking about a congressional appropriation, and appropriations have to be expressly made by Congress under the Constitution.

But if you’re a supporter of Obamacare, you’re probably saying, ‘Oh, come on! It’s pretty clear Congress wanted everyone to get the subsidies.’ That, in a nutshell, is the government’s response. The IRS therefore set forth a rule that extended the subsidies to those enrolled in a ‘State Exchange, regional Exchange, subsidiary Exchange, [or] a Federally-facilitated Exchange.’

It will be interesting to see how all this plays out, especially in the event the administration agrees to delay the individual mandate for six months or more. Obamacare could turn out to be the most controversial, costly law that never was.

LU Staff

LU Staff

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