The Next Big Threat to ObamaCare

The Obama Administration suffered another defeat recently with the Supreme Court’s decision in favor of Hobby Lobby in their request for an exemption to the Contraception Mandate. While this ruling was of major importance in preserving religious freedom for all Americans, it was never a threat to the survival of the law itself. Many employers will avail themselves of this exemption and will not be compelled to violate their conscience by providing abortifacients to their employees. But the law will continue and those employees will find other ways to pay for those abortifacients these employers refuse to subsidize.

But another case pending in the courts represents an existential threat to the future of ObamaCare. Halbig v. Sebelius was heard on the same day as Hobby Lobby v. Sebelius, and in the same city of Washington, D. C., but by the lower U.S. Circuit Court of Appeals. Although this case got much less attention on March 25th than Hobby Lobby, the decision may have much greater impact on the future of the law.

The Issue at Stake

The case is all about eligibility for subsidies for those individuals purchasing health insurance on the government exchanges. The law was written to stipulate that those who would receive subsidies must do so on state-run exchanges. Those who signed up on federal exchanges would not be eligible for subsidies. This was not an unintended consequence.

When ObamaCare was debated in the Congress, there was much disagreement on this issue. The Wall Street Journal editorial board clarified this issue in the days just prior to the court’s hearing of the case in March. They wrote:

“The Affordable Care Act – at least the version that passed in 2010 – instructed the states to establish insurance exchanges, and if they didn’t the Health and Human Services Department was authorized to build federal exchanges. The law says that subsidies will be available only to people who enroll “through an Exchange established by the State.” The question in Halbig is whether these taxpayer subsidies can be distributed through the federal exchanges, as the Administration insists.”

They explain that Democrats were divided over the structure of the exchanges, with liberals favoring federal exchanges and moderates favoring state control. Senator Ben Nelson (D-NE) held the key vote and was concerned about excessive federal control of the exchanges. The federalists (those upholding states’ rights) won and conditioned the subsidies on state-based exchanges. The Constitution preserves the rights of states to their own sovereignty so Democrats created an incentive for Governors to participate voluntarily.

They established a quid pro quo to encourage participation. If they didn’t cooperate by establishing state exchanges, they wouldn’t be eligible for the billion of dollars of subsidies for their constituents. The administration also hoped the states would pick up much of the work of implementing the exchanges rather than forcing HHS to do the work instead. The White House was so convinced of the merits of the law they never dreamed the states would object to this provision.

But they were sadly mistaken. Rather than submit to this quid pro quo, 34 states opted out. At present, only 16 states and the District of Columbia established their own exchanges. Many of these have since failed (see earlier blog The Blue States Fiasco). This left the White House with a dilemma; obey the law denying subsidies to approximately two-thirds of the population and consequently threaten the survival of the system; or ignore the law and provide subsidies to those signing up on the federal exchanges. They ignored the law, arguing Congress actually intended the subsidies to be available to all. This argument holds little water when you recognize that the restrictive language appears no less than nine times in the text of the law.

Recent Court Rulings

The plaintiffs in Halbig v. Sebelius (now Halbig v. Burwell) are individuals and small businesses in six states that didn’t establish state exchanges. They objected to the White House’s rewriting of the law because, without the subsidies, the plaintiffs could have claimed exemptions from the Individual Mandate tax. That’s because the law exempts those individuals whose cost of obtaining insurance exceeds 8% of their income. But with these subsidies, many of these individuals and small businesses are no longer exempt.

Recent court rulings give encouragement to their cause. In a recent Op-Ed for The Los Angeles Times, liberal constitutional law professor Jonathan Turley cites important evidence of the Supreme Court’s sympathies:

“In Michigan v. Bay Mills Indian Community, for example, Justice Elena Kagan noted that “this court does not revise legislation . . . just because the text as written creates an apparent anomaly as to some subject it does not address.” In Utility Air Regulatory Group v. EPA, Justice Antonin Scalia, writing for the majority, stressed that “an agency has no power to tailor legislation to bureaucratic policy goals by rewriting unambiguous statutory terms.” And a third strike came last week in National Labor Relations Board v. Canning, when the Supreme Court unanimously found that President Obama had violated the Constitution in circumventing Congress through his use of recess appointments.”

Turley, an Obama supporter, has nevertheless been critical of the president’s overreach on executive powers.

Others agree with Turley’s assessment. Jeffrey Dorfman, writing for Forbes cites these same recent rulings and believes ObamaCare is facing a major setback and even a possible collapse. He sums up the situation as follows:

“While everyone focuses on the impact of Utility Air Regulatory Group v. EPA on the government’s power to address climate change, the Supreme Court may have done more to impact the future of ObamaCare with their ruling than they did to impact the future of the world’s climate.”

The Impact of a Halbig Victory

Turley believes the impact of a Halbig victory is hard to overstate. Without subsidies, those individuals in the 34 states without exchanges would face huge additional costs and many would drop their health insurance. Many of these, like the Halbig plaintiffs, would then be eligible for exemptions from the Individual Mandate. All of this would raise the cost of health insurance for all those purchasing coverage. This would reawaken fears in the insurance industry of the “death spiral” when not enough people purchase insurance to defray the costs of their medical expenses.

Rising insurance costs would increase the need for government bailouts of the insurance industry even more than has already happened. (see earlier blog Insurance Bailout Has Begun) The public’s reaction to this situation would surely provoke a Congressional overhaul and possible repeal of ObamaCare.

John Fund, writing for National Review Online, believes some states would move to set up their own exchanges, perhaps benefiting from the lessons of ObamaCare’s shaky rollout. But he also states the Obama administration would have no choice but to work with Congress as it revisited the exchange issue and rewrote the law. He concludes:

“A favorable ruling in Halbig by the Supreme Court might be just the two-by-four needed to get President Obama’s attention and make him realize that his pen has run out of enforcement ink.”

None of this scenario will happen quickly. A Halbig victory would surely be appealed to The Supreme Court, which would take months. However, it would be another important restraint on this president’s continued overreach of his executive powers and further evidence of the failure of his healthcare legislation. The decision, to be handed down any day now, could conceivably put one more nail in the coffin of ObamaCare just before the mid-term elections.

No comments yet. You should be kind and add one!