Op-Ed:  Obamacare court ruling is nonsensical and cynical

The Affordable Care Act formally requires states to establish exchanges. But it expressly acknowledges that some states might not do so.
(Anna Parini / For The Times)
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At last count, more than 8 million people are getting healthcare through an Obamacare exchange. Almost three-quarters of them are using the federal exchange. These millions of Americans ought to be able to finally leave behind the stress of living with no insurance or inadequate or unaffordable insurance. But thanks to two cases decided by federal appeals courts Tuesday, their security and peace of mind remain at risk.

The courts in those two cases, Halbig vs. Burwell and King vs. Burwell, reached opposite decisions, and the ultimate outcome will probably be determined by another contentious decision from the Supreme Court.

In these cases, opponents of Obamacare argue that the Affordable Care Act prohibits people who purchase insurance on exchanges set up by the federal government from obtaining the tax subsidies that the act otherwise provides. In other words, the millions of people who enrolled in the 36 states that refused to set up their own exchanges — and instead left the job to the federal government — are potentially not eligible for the subsidies.


In the Halbig case, a panel of the U.S. Court of Appeals for the District of Columbia Circuit agreed with that argument by a 2-1 vote. However, a panel of the U.S. 4th Circuit Court of Appeals in Richmond, Va., rejected the argument in the King case, creating a split that signals more litigation.

The D.C. Circuit relied on a superficially plausible but ultimately nonsensical reading of the Affordable Care Act’s text. The ACA’s tax credit provision says that subsidies will be available to those who buy insurance on an “exchange established by the state.” If that were all the statute said, the plaintiffs might have a point. But the statute says much more.

The ACA formally requires states to establish exchanges. But it expressly acknowledges that some states might not do so. It therefore provides that, in states that fail to set up the required exchanges, the federal government shall “establish and operate such exchange within the state.”

When the federal government sets up an exchange, therefore, it is operating the exchange that the state was required to set up. The statute, by its very terms, makes clear that the federally operated exchange has the same function, entailments and consequences as a state-operated one.

More significant, the act wouldn’t make sense if it were read the way the D.C. Circuit suggests. That is the point that a group of scholars (including one of the authors of this Op-Ed) made in an amicus brief in the case. These 48 experts in health economics — among them two Nobel laureates and appointees from the administrations of Presidents Johnson, Ford, Carter, George H.W. Bush, Clinton, George W. Bush and Obama — explained that the reform does not work if subsidies aren’t available on all the exchanges, and that members of Congress understood this at the time they passed the ACA.

Near-universal coverage is the central goal of the act. The law achieves this goal by relying on a three-legged stool: nondiscrimination (letting everyone get insurance, despite preexisting conditions); an individual mandate (requiring almost everyone to buy insurance or pay a penalty so that both sick and healthy people will populate risk pools); and subsidies (so that people will be able to afford to buy the mandated insurance). Economic models demonstrate that without the subsidies in question, average premiums would double and approximately 6.5 million fewer people could get insurance.


In their briefs, Obamacare’s challengers argued that the threat of withholding federal subsidies from states that did not comply, even if it meant creating a situation where exchanges couldn’t function in those states, was precisely what Congress intended. They suggest that the reason Congress was willing to risk catastrophic failure of the act was to strong-arm states into participating (and, by the way, stick it to the Republicans by making their constituents angry if the strong-arming failed). And they suggested that the ploy backfired.

So we are to believe that, in the midst of a contentious and detailed process of designing and negotiating health reform, and strategizing to pass it, Democrats weren’t really thinking about how to offer enough money to those in need to help them secure care, but were instead merely creating a purposefully coercive way to implement the law? In an era in which it is hard to imagine that politics could become more cynical, this argument tops them all.

The majority decision from the D.C. Circuit advanced a similarly implausible story to explain why Congress would have risked the failure of the ACA. In the guise of painstaking legal reasoning, it ranged far into the details of the act and found signs that the government’s lack of commitment to it couldn’t be discounted. But it stretches credulity to believe, as the court suggests, that because Congress created exemptions from the individual mandate in the Northern Mariana Islands, it meant to undermine that basic premise of the act for most Americans.

The ACA is filled with inartful drafting. This is the predictable result of its bare-knuckled legislative history, as is the relentless search for legal flaws that can be used to tear down the act. The courts should not allow themselves to be a tool in this effort.

There is not one shred of reliable evidence that anyone — members of Congress, the states that opposed exchanges entirely, the states that supported exchanges but opted to allow the federal government to operate them — understood the Affordable Care Act to limit subsidies to only participants in state-established exchanges. The courts should not rewrite the law and its history to achieve that perverse result and threaten the health and financial security of millions of Americans.

Jill Horwitz is a law professor at UCLA School of Law, specializing in healthcare issues. She joined the economists’ amicus brief supporting the ACA. Samuel Bagenstos is a law professor at the University of Michigan, specializing in constitutional and civil rights litigation.


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