A Weasely Way to Fight a Law

A few blocks away from Tuesday’s Supreme Court culture war skirmish on access to contraceptives was a DC Circuit Court of Appeals hearing on another, less sexy Obamacare-related issue: a drafting error in the Affordable Care Act that could eventually damage the law’s fragile structural integrity.

Whatever the Supreme Court rules on the Affordable Care Act’s “contraception mandate” that was under review yesterday, it will not destroy the law. The worst thing the high court could do is decree that a handful of emergency contraceptives offered under employee health plans would either not be covered, or would require copays—nasty little shots to one of the administration’s laudable public health goals, but not a law-killer.

The case before the DC Circuit Court, however, could knock down one of the law’s necessary pillars: subsidization of health insurance plans for low- and middle-income people. As with the mandate requiring individuals to either purchase health insurance or pay a fine, which the Supreme Court upheld two years ago, the subsidies help balance insurance risk pools. Without the threat of a tax penalty or the offering of subsidies, healthier people would be less inclined to purchase insurance. And when the risk pool is limited only to very high-risk individuals who desperately need insurance, rates shoot up.

The challenge against the individual mandate, at least, went to the core of the law—constitutionally, morally, and philosophically. Can the government tax you for not purchasing something? This question faces the law head-on. By contrast, the challenge against the subsidies in federal court does not. The plaintiffs do not argue that subsidizing health insurance plans is an unconstitutional, immoral, or philosophically defective practice. Their argument instead points out a drafting error—poor wording, basically—in the text of the ACA, which they say proves that Congress can’t offer subsidies to plans that aren’t on state-run exchanges.

Those who have been following the ACA since its legislative inception know the intent of the law pretty clearly: the government would offer subsidies to help people afford health insurance plans offered on exchanges. If state governments didn’t set up those exchanges, then the federal government would step in and do so. Now, it’s true that when the ACA was enacted, legislators didn’t expect all of thirty-six states to fail to set up their own exchanges, so that the federal government would set up exchanges in those states. But that’s how it happened. So what? Should the people in thirty-six states receive subsidies because of that?

That’s exactly what the challengers are opportunistically arguing. The plaintiffs argue that the way the law was written—for subsidies to be offered on exchanges “established by the State”—was the lawmakers’ intent, to serve as an inducement for states to set up their own exchanges.

Alec MacGillis at The New Republic has more:

As readers may recall from our previous coverage of this challenge, it revolves around an argument put forward in 2011 by Jonathan Adler, a law professor at Case Western University, and Michael Cannon, a health care analyst at the libertarian Cato Institute and a committed Obamacare foe. They argue that the law is being carried out in contravention with its text: The section decreeing that people will get federal subsidies to help them pay for private insurance plans says that the subsidies are available for those buying plans on new exchanges established by the states—and makes no explicit provision for subsidies for those buying plans in states where governors and state legislators left the creation of the exchange up to the federal government. The law’s challengers—represented in the D.C. Circuit case, Halbig vs. Sebelius, by lawyer Michael Carvin—say the limiting of subsidies to state-based exchanges was no mere drafting oversight but rather a deliberate attempt by Democrats who wrote the legislation to induce states to set up their own exchanges rather than rely on the federal government to do so.

The government and other defenders of the law counter that any confusion in the wording was inadvertent and that the rest of the law makes abundantly plain that the subsidies were intended to go to people buying plans in the exchanges regardless of whether they were established by the states or by the Department of Health and Human Services. They note that there is zero mention anywhere in the legislative history of the law’s drafting of the subsidies being used as an incentive for states to set up their own exchanges; if the subsidies were meant to be an inducement to the states, why weren’t the law’s authors and proponents actually, you know, advertising that inducement? And they point to other places in the law where it is plain that the subsidies were intended for people buying insurance on both state-run and federal-run exchanges, such as the requirement that both forms of exchanges report people’s insurance purchases to the Internal Revenue Service, which calculates the level of subsidy (technically a “refundable tax credit”).

MacGillis and others following the hearing seem to agree that it’s likely that two of the three judges on the appeals panel will side with the challengers. (One Republican-appointed judge described the ACA, over the course of the hearing, as “Janus-faced,” “cobbled together,” “poorly written,” and an “unmitigated disaster.”) Similar challenges have been thrown out in other courts, but if the plaintiffs get a win here and maybe in another state or two where more cases are being heard, it will almost certainly wind up at the Supreme Court.

If this challenge against subsidies is the way in which the ACA becomes unspooled, that would be about as lame as it gets. Most people, no matter their opinion on the legality of the individual mandate, can agree at least that it’s the most loathsome part of the law, the devil’s bargain the Obama administration made so it could implement some worthy reforms in exchange for allowing the health insurance industry middleman to survive. But unclear wording, in the pursuit of an otherwise uncontroversial plank? Give me a break.