Same day, same issue, two different decisions. Last week, federal appellate judges were at odds over what the law behind Obamacare says and what it means. At issue is whether Obamacare subsidies to buy health insurance flow to all states or only to those states that set up their own insurance exchanges.
The law says it should be the latter, but the IRS interpreted the law to give subsidies to all comers. The 4th U.S. Circuit Court of Appeals in Richmond, Va., ruled the IRS was correct, but on the same day, the U.S. Court of Appeals for the D.C. circuit ruled the IRS violated the rule of law and threatened the separation of powers.
It’s no surprise that a few of the 400,000-odd words in the hastily written Affordable Care Act were a little imprecise. The law says subsidies are available only to taxpayers who enrolled “through an exchange established by the state,” not the federal government. Strictly interpreted, if you live in one of the 34 states that relied on the federal government to set up an insurance exchange for them, you can’t get a subsidy when you buy from HealthCare.gov.
If you have insurance through your employer, Medicare, or Medicaid, you aren’t affected by these rulings, other than paying taxes.
The two courts interpreted the same law differently, and each court used a different legal theory reach its conclusion.
The D.C. Circuit recognized the principle of legislative supremacy, by which Congress makes policy and the courts, not the executive branch, interpret it. Those judges interpreted the law as written, while the other court tried to discern its intent. Lawyers typically try to find intent by looking at legislative history. But legislative history was scant in this case because Obamacare was a huge law passed quickly without bipartisan support.
The 4th Circuit looked at another part of the law that states the federal government “shall establish and operate such exchange.” “Such,” the court stated, implies when a state doesn’t set up its own exchange, the federal government steps in as proxy. That would mean subsidies would go to whoever bought insurance, no matter where they lived.
If ultimately the letter of the law prevails, it could mean no subsidies in the 34 states without their own Obamacare exchanges. Of the 5.5 million people who bought insurance on the federal marketplace, 87 percent got a subsidy.
This would seem to be an easy fix. If Congress didn’t mean what Congress wrote, why not rewrite the law? But there’s no way the White House wants to open that door. Congress might try to repeal the law or rewrite huge parts of it. The president needs the court to save him.
The next step will be appeals. There’s lots of strategizing going on about which court skews liberal, which court skews conservative, and so forth. Of the six judges between the two appeals courts that ruled last week, four agree with the administration, and two don’t. The opinions are precisely split along party lines: the pro-IRS judges were appointed by a Democratic president and the others by a Republican.
After the D.C. Circuit Court issued its ruling, a reporter asked White House spokesman Josh Earnest whether Obamacare could work without subsidies available to all. He dodged the question, saying the president was counting on judges to discern the intent of the law and uphold it.
Obamacare is about two crucial things: A broader risk pool and subsidies to get customers into that risk pool. Without the subsidies, the system will collapse. Congress is now so sour on the deal that the president cannot risk having them rewrite it. The entire law is in peril.