On July 22nd the D.C. Circuit Court of Appeals upheld the law as written in The Affordable Care Act or ObamaCare in their ruling on Halbig v. Burwell. This was a defeat for the Obama White House since they had chosen to reinterpret the law to advance their political agenda.
The issue concerns the qualification for subsidies for those enrolling in ObamaCare on the individual exchanges. The law clearly states that those entitled to subsidies must enroll on “exchanges established by the state.” This provision of the law was intended as written in order to preserve the sovereignty of the states and to incentivize state governors to establish their own exchanges so that their residents would be eligible for the subsidies.
However, despite this incentive, 36 states refused to establish their own exchanges. This unexpected result left the Obama White House with a huge problem. This meant that more than two-thirds of the states would not be providing subsidies to their residents. Since the law exempts people from the Individual Mandate tax whose cost of insurance exceeds 8% of their income, many of these people would have chosen not to purchase insurance. This possibility posed an existential threat to the future of ObamaCare.
Even more threatening to the Obama White House was the possibility this could jeopardize the President’s re-election campaign in 2012. Therefore the White House looked to the IRS to solve their problem. According to Kimberley A. Strassel, writing in The Wall Street Journal, in the late summer of 2010 after passage of ObamaCare, the IRS assembled a working group whose initial intent was to follow the text of the law. An early draft of its rule about subsidies explained that they were for “Exchanges established by the State.”
But in March 2011, when it became evident that 36 states were not establishing their own exchanges, everything changed. IRS officials began focusing on a new interpretation of the health care law. The office of the IRS chief counsel, a political appointee, drafted a memo telling the group that the text should be interpreted to mean that everyone, in every exchange, got subsidies. Some time between March 10 and March 15, 2011, the reference to “Exchanges established by the State” disappeared from the draft rule.
Clearly concerned about the legality of this new interpretation, the IRS sought coverage for its predetermined political goal. A March 27, 2011 email has IRS employees asking HHS political hires to cover the tax agency’s backside by issuing its own rule deeming HHS-run exchanges to be state-run exchanges. HHS complied with their request in July 2011. One month later the IRS put out its ruling that provided subsidies for all.
Strassel summarizes this illegal activity thus:
“The IRS (famed for nitpicking and prosecuting the tax law), chose to authorize hundreds of billions of illegal subsidies without having performed a smidgen of legal due diligence, and did so at the direction of political taskmasters. The agency’s actions provided aid and comfort to elected Democrats, even as it disenfranchised millions of Americans who voted in their states to reject state-run exchanges. And Treasury knows how ugly this looks, which is why it initially stonewalled Congress in its investigation – at first refusing to give documents to investigators, and redacting large portions of the information.”
Law professor Jonathan Adler of Case Western Reserve and Michael Cannon of the Cato Institute first called attention to this IRS abuse in an Op-Ed article in The Wall Street Journal in 2011. In a follow-up article recently, they write, “At its heart, though, Halbig is not just about ObamaCare. It is about determining whether the president, like an autocrat, can levy taxes on his own authority.”
The White House strategy to defend this lawlessness is to claim it was the original intent of Congress to provide subsidies to everyone. Therefore they are merely implementing the law as Congress intended. In their defense, the liberal 4th Circuit Court applied this interpretation to the law in upholding the government’s position in King v. Burwell.
However, this is clearly a fabrication of the truth. Recently video evidence was found that gives insider testimony indicating Congress never intended for subsidies to be received on the federal exchanges. Jonathan Gruber, MIT economist and one of the authors of ObamaCare, made at least two public appearances after the law was passed by Congress in which he said, “If you’re a state and you don’t set up an exchange, that means your citizens don’t get their tax credits. I hope that that’s a blatant enough political reality that states will get their act together and realize there are billions of dollars at stake here in setting up these exchanges.”
As you might expect, Gruber is now trying to walk back those remarks much like Hillary Clinton is now trying to distance herself from the foreign policy of President Obama. But if we’re to believe that they weren’t telling the truth before, why should we believe they’re telling the truth now?
The Wall Street Journal editorial staff makes it clear there is no ambiguity in the law as written. Judge Thomas Griffith, speaking for the majority in the Halbig v. Burwell decision, admitted they reached their decision “frankly, with reluctance” considering the consequences. “But, high as those stakes are, the principle of legislative supremacy that guides us is higher still. Within constitutional limits, Congress is supreme in matters of policy, and the consequence of that supremacy is that our duty when interpreting a statute is to ascertain the meaning of the words of the statute duly enacted through the formal legislative process.”
The issue is sure to be eventually decided by the Supreme Court since the Circuit Courts have rendered conflicting opinions. Hopefully, they will agree to hear it soon since billions of dollars of subsidies are being doled out to millions of Americans under the Obama administration’s IRS interpretation of the law. If the Halbig v. Burwell decision is upheld by the Supreme Court, ObamaCare, in its current language, would implode. It would be necessary for Congress to rewrite the law to clarify this issue; an unlikely scenario with a Republican controlled House and maybe even Senate.
Ironically, if the Supreme Court does hear the case, Chief Justice John Roberts would get a second bite of the apple to honor his famous words spoken when the court reviewed the Individual Mandate. He said in 2012, “It is not our job to protect the people from the consequences of their political choices.”