Halbig Decision Puts Obamacare Back on the Front Burner and Will Give GOP a Massive Political Headache

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Today’s 2-1 decision by the DC Court of Appeals striking down federal premium subsidies, in at least the 27 states that opted for the feds to run their Obamacare insurance exchanges, has the potential to strike a devastating blow to the new health law.The law says that individuals can get subsidies to buy health insurance in the states that set up insurance exchanges. That appears to exclude the states that do not set up exchanges––at least the 27 states that completely opted out of Obamacare. Another nine states set up partnership exchanges with the feds and the impact on those states is not clear.The response by supporters of the law, and the IRS regulation that has enabled subsidies to be paid in the states not setting up exchanges, hinges on the argument that the language is at worst ambiguous and the Congress never intended to withhold the subsidies in the federal exchange states.

But in the DC Court ruling one of the majority judges said, “The fact is that the legislative record provides little indication one way or the other of the Congressional intent, but the statutory text does. Section 36B plainly makes subsidies only available only on Exchanges established by states.”

My own observation, having closely watched the original Obamacare Congressional debate, is that this issue never came up because about everybody believed about all of the states would establish their own exchange. I think it is fair to say about everyone also believed a few states would not establish their own exchanges. Smaller states, for example, might opt out because they just didn’t have the scale needed to make the program work. I don’t recall a single member of Congress, Republican or Democrat, who believed that if this happened those states would lose their subsidies.

At worst, this is clearly a drafting error that in the old days would have been quickly fixed in a technical corrections bill. But these aren’t the old days.

This will now work its way through the courts. No one risks losing their subsidies until this issue is finally decided. That will not happen until well after the next open-enrollment on November 15th.

So, for now it is business as usual for Obamacare. But this will send a chill through about 4 million people in these states that are among the 87% who received a subsidy on the federally-run exchanges and are getting an average of 76% of their premium subsidized.

A few observations:

  1. It is hard to see how a Roberts’ Supreme Court would finally deal Obamacare so serious a blow given that the Court upheld one of the core elements of the law with the Chief Justice going through the legal contortions he did by calling the individual mandate penalty a tax. In fact, coincidentally the 4th Circuit Court of Appeals in Richmond later ruled in favor of the administration on this issue today in a 3-0 decision.
  2. If this is upheld it has the potential to be devastating for Obamacare. With so many people receiving so much in subsidy, the potential is there for the healthiest of these to drop their coverage while the sickest do whatever they need to do to keep their policies creating a major anti-selection problem for the insurers. Premiums on these federal exchanges would undoubtedly skyrocket.
  3. This would put Republicans in the federal exchange states in a heck of a political bind. It seems to me these governors and legislators could opt to immediately proactively contract with the feds to operate their exchanges for them in order to preserve the subsidies (If a state can contract with Accenture to build and run and exchange, why couldn’t it contract with HHS to do the same?). If the states were to do this immediately, no one would have to lose their subsidies.

So what would these Republican governors and legislators do?

In effect, the political consequences for all of these people losing their subsidies and their coverage would immediately shift to the Republicans who control these state governments.

Proponents of Halbig argue that the fault for people losing their coverage would be on the Obama administration because they have operated Obamacare in an illegal manner by paying subsidies that are not allowed under the statute.

The courts could well end up supporting that argument.

And, millions of people would have their insurance yanked out from under them in what people will see as part of the ongoing partisan political wars being waged by people out of touch with life in the rest of the country.

The fundamental problem the Halbig proponents have here is that common sense, whatever a court rules, tells people that denying subsidies in half the states was never the intent of the Congress––that this is all about political point scoring and stopping a law Republicans hate.

Obamacare has lots of problems. But many would argue those problems should be solved in the Congress, not in the courts. If the proponents of Halbig want to effect real change they need to win some elections.

Poll after poll says a big majority of voters want Obamacare fixed not repealed.

Obamacare’s most partisan and ideologically opposed enemies scored a big victory today.

On the surface, Republicans will be attributing this decision to the way the Democrats and the Obama administration wrote this flawed law and the way they have implemented it. But below the surface lots of sensible Republicans must be sweating bullets.


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22 replies »

  1. Joel, the Republicans are totally committed to the concept of states being able to choose just how much social insrurance they should enact.

    This is why Medicaid is such a mess in some states. This is why voting rights and civil rights took many years to cover the whole country.

    I will be honest, Joel. I deeply distrust state’s rights. It has been an excuse for racism in the south, and an excuse for stinginess in many other states.

    I prefer national programs like Medicare and Social Security. I am sad that the drafters of the ACA gave ten minutes to state’s rights.

    • Frankly, I don’t think the drafters of this legislation gave one minute to honestly be concerned with anything about rights and real interventions to improve health care.

      Two truths that seem to be consistently seen with political mandates throughout history:

      1. Mandates never are about individuality, as the drafters of mandates only see everyone through one narrow, single colored lens, and then have no concern when there are more than random chance exceptions that should be exempted from the mandate boundaries.
      2.. Drafters of mandates almost always don’t participate in the mandate, because they come up with the most lame and dishonest reasons why they should be exempted. Oh, because they are not to be viewed with that same dysfunctional lens as mentioned in #1 above.

      And health care mandates specifically are a contradiction in terms with the Hippocratic Oath. But, the politicians did not ask for real physician input in crafting this bill, just the very photo opps (disdained by Obama and ilk when not benefiting the agenda) that really showed the disingenuous efforts at the time the bill was finalized and signed.

      But, you don’t read that kind of opinion here over 95% of the time. That is counter productive to the agenda of The Health Care Blog. Printing the infrequent obligatory dissenting post does not legitimize honest and fair debate.

      There are material goods to be purchased, power to be maintained, and lives to be burdened all in the name of partisan agendas. That is what politics in America is about these days, irregardless of what party is in power, and I know most of the usual commenters know this.

      They just don’t want readers with any hope and faith to realize this! See George Carlin’s last show before he died in letting us all know who really is in charge, and an educated and informed electorate is the LAST thing those really in power want in this country.

      Oh, and controlling the electorate’s health, boy, isn’t that a power play???

      IPAB folks, wait for it to happen!

  2. Joel, thanks for referring to The Federalist. Even when I disagree with Greg Scandlen and others, the quality of Federalist writing is high.

    Ironically, the development of Canadian Medicare was moved forward mainly by the provinces. Decentralization is not always evil.

    Seems to me that in Canada, the provinces were more liberal than the federal government. In America the opposite is true.

    I suspect that the state-exchange structure of the ACA was kind of a bone that was thrown to conservative Democrats to get the bill passed.

    • Hmm, then why didn’t one republican vote for it back in 2010? An illusion of being conciliatory seems to be exposed as simply that, an illusion, when the rest of the meat of the bill is not about honest and responsible interventions into the health care system.

      “we want to work with you, but only on our terms”. Yeah, like I would agree to that!

      • It would seem that no one in Congress actually read the proposed legislation well enough, and thus should not have voted on it.

        However, the minds of politicians were all on the big money prize, as the repeal of Glass-Steagall made it much easier to rob the American public blind.

  3. So I am being moderated and then censored because I am outrageous, or inappropriate, or perhaps, not just echoing the party line while noting legitimate opposition?

    Anyone read this directly related to the post above:


    I will be posting at my own blog what comment was deleted, or rather not printed yesterday, and I will be interested if readers think I was out of line, or, just once again wasting my time commenting here.

    Oh, and the link above, what did it say in the end?

    “The deliberate creation of a separate section to authorize a separate federal entity is not a drafting error. The repeated and deliberate reference to one section but not another is not a drafting error. The refusal to grant equal authority to two programs authorized by two separate sections is not a drafting error. The decision to specifically reference section X but not section Y in a portion of a law that grants spending or tax authority is not a drafting error.

    The clear text of the law repeatedly demonstrates that plans purchased via federal exchanges were never meant to be treated the same as plans purchased by state-based exchanges. Despite its assertions, the IRS was never granted the statutory authority to hand out tax credits related to plans purchased via a federal health exchange.

    All of that of course begs the question: if the law’s authors originally intended to constrain subsidies to state plans, what was the rationale for the IRS about-face in 2011? That’s actually an easy one to answer: the administration never imagined that so many states would refuse to establish Obamacare exchanges. The subsidies for state exchange plans were meant to be pot sweeteners—incentives for states to set up their own exchanges. If fines for mandate non-compliance were Obamacare’s stick, the subsidies for state exchange health plans were the carrot. To the law’s backers, that plan made sense: the White House didn’t really want to have to manage 51 separate exchanges. They wanted the states to do all the heavy lifting. Unfortunately, several dozen legislatures and governors had different plans.”

    Can this comment be printed?

    • Joel

      You are being moderated because your post contains hyperlinks.

      Our comment modertaing system is mindless and automated

      Not mindless and political

      Although there are times when I wish that it had a fact-checker built in

      It might have trouble with yours

      • thank you for the clarification. I would like to resubmit the comment, I guess I have to decide what to delete?

        • My mistake, I had commented at Matthew Holt’s subsequent article above this one, sorry for the error in interpretation.

      • Why don’t you pass them, and then I’ll get back to you if they are of any worth to use.

  4. I agree that this is much fuss about nothing buit Basically the entire ACA process from formulation to legislation to the court process is example A that shows that America’s system of government is just stupid. It just doesn’t work in the modern world.

    And you’ll note that the parts of government that apparently are really important (NSA, CIA, DOD, FBI etc) just ignore the law and the courts and do as they please.

    We need a constitutional convention to institute some type of parliamentary democracy because a benign dictatorship would be better than what we have now.

    • A Constitutional Convention. Say goodbye to the 1st, 4th, 5th, and 14th Amendments for openers. The 2nd will move up to #1 (I get death threat for advocating for its repeal and otherwise challenging the gun nuts. http://bgladd.com/OpenCarryHarry.jpg). The 14th will be replaced by a “Personhood at Conception” amendment, and the “One Dollar, One Vote” principle will be enshrined.

      i agree with you to a great degree however. Lots of democracies get on just fine without ANY Constitution

    • @Mr. Holt “shows that America’s system of government is just stupid. It just doesn’t work in the modern world.”

      So naturally, we need single payer.

  5. Everybody…

    Breathe IN, breathe OUT…

    This one gets reversed en banc later this year. Of course the eventual destination is — yet again — SCOTUS.

  6. Jardinero, you are right that ACA rules on small group insurance can be very damaging, and are highly resented.

    But I do not think that the legal dispute on federal exchanges would have any impact whatsoever on the small group market rules.

  7. I am not sure if you live in a red state. But in Texas, you are talking about a couple hundred thousand people, who may not be registered to vote, in a state that is about 60/40 Republican. There are many, many more people in group plans who are also adversely affected by the requirements of theACA and the fact that a majority of Texans would rather have the insurance industry regulated in Austin and not in DC. Sorry, I don’t see a problem with this ruling in Texas

  8. Nonsense. As usual, I think this is much ado about nothing. This is clearly not what those writing the law intended. A reasonable compromise will be worked out, but not until we’ve all been forced to watch this idiocy for another tew months. The one thing this guarantees? More absurd legal challenges on the finer points of the law.

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