ObamaCare — A technicality is sneaking up on you

Halbig v. Burwell is a potent challenge to the viability of the Patient Protection and Affordable Care Act (ObamaCare) which became law in 2010. The case rests on a technicality that has sharp teeth. Congress could stop the lawsuit in its tracks by clarifying what it meant by three words in the act. It won’t. The Republican House wants ObamaCare to falter. The Democratic Senate will not admit anything is wrong.

At issue are the subsidies currently provided to approximately 4.5 million subscribers to ObamaCare. Without the subsidies, a great many low-income people will be unable to afford healthcare insurance.

{mosads}The designers of ObamaCare expected each state to set up its own healthcare insurance exchange, and it offered them incentives to do so. One incentive: subsidies or tax credits for lower-income people. To qualify, however, an applicant had to enroll through an exchange defined by Section 1311 of the act. It stipulates that an exchange is a “governmental agency or nonprofit entity that is established by a state” [italics added]. Federal bureaucrats believed state officials would not reject the estimated $800 billion in tax credits offered to their residents.

Their faith was misplaced. In all, 36 states opted to use the back-up system of a federally run health insurance exchange. For one thing, the Obama administration underestimated resistance to the “employer mandate” by which employers were forced to provide health plans that included abortifacients even if they had deep religious objections to abortion. This created a problem. By the language of the act, the federally run exchange did not trigger subsidies.

Enter the Internal Revenue Service. In 2012, the IRS redefined the meaning of “exchange” to include the federally run one. The appellants in Halbig v. Burwell consider the redefinition to be a violation of law and a statutory overreach by an agency not authorized to create or amend legislation. The government counter-argued that Congress had intended to extend healthcare insurance to all Americans. In short, it appealed to the law’s intent rather than to its wording.

On July 22, the court of appeals for D.C. ruled. The language of the law was clear: The IRS overstepped its bounds. The three-judge panel found 2-1 in favor of Jacqueline Halbig, the senior policy adviser to the Department of Health and Human Services (HHS) under President George W. Bush. (Sylvia Mathews Burwell is the current secretary of HHS.)

Moving forward, the situation becomes more complicated. The Obama administration has asked for an en banc review of the three-judge decision. If granted, this means the 11 judges of the D.C. Circuit will rule. The three-judge panel responsible for the Halbig victory consisted of two Republican appointees and one Democrat. The full court consists of seven Democratic appointees and four Republican, with four of the judges owing their seats directly to Obama. The Halbig v. Burwell decision will be overturned.

And then there is King v. Burwell. On the same day as the Halbig ruling, the appeals court for the Fourth Circuit ruled on a similar case and contradicted the D.C. court. The Virginia court decided 3-0 in favor of Burwell and the government.

The key question of ObamaCare subsidies is headed to the U.S. Supreme Court. Halbig v. Burwell will certainly do a SCOTUS run when the full court denies the ruling. The appellants in King v. Burwell are unlikely to ask for an en banc review because the full court is not politically sympathetic. But a Supreme Court filing for it is quite possible.

The Supreme Court is the best, last hope of Halbig. The court is not known for taking brave stands, but it surprised many in its ruling on Burwell v. Hobby Lobby. A corporation sued for the right of its deeply religious owners not to provide health insurance that included abortifacients. The ruling favored the corporation. But the impact was not far-reaching; a for-profit corporation was found to be exempt only if it was a “closely held” corporation — that is, a business with a limited number of shareholders.

By contrast, Halbig could affect every American by drastically altering the financial framework for healthcare insurance. Three basic types of people subscribe to ObamaCare: healthy people with low incomes who are subsidized; unhealthy people with preexisting medical conditions; and those who already buy private insurance. The first category is the largest by far.

Moreover, the case hinges upon what the Supreme Court seems to love most: a technicality.

McElroy is a research fellow at the Independent Institute.