March 23, 2010 - President Barack Obama signs the health care bill in the East Room of the White House in Washington.
ALEXANDRIA, Va. — The Affordable Care Act gives the president’s Cabinet officers sweeping powers to implement the law, but the administration managed to overreach these powers by allowing people in 36 states to illegally access health insurance subsidies.
That was the conclusion of the D.C. Circuit Court of Appeals in July. At issue is the ability of people who sign up for coverage through exchanges established by the federal government to receive credits to reduce the cost of their health insurance.
D.C. Appeals Court Judge Raymond Randolph said the statute was quite clear in repeating seven times that subsidies are available only “through an Exchange established by the State.”
When the health law was passed, its authors apparently believed they had sufficiently cajoled the states. Jonathan Gruber, a chief architect of the law, said in early 2012, “if you’re a state and you don’t set up an exchange, that means your citizens don’t get their tax credits.”
But when it became clear that most states would not be coerced, the White House called on the Internal Revenue Service to write a regulation that would allow the subsidies to flow through the default federal exchanges as well.
In Halbig v. Burwell, the D.C. Circuit held that subsidies — as well as the coverage mandates that travel with them — apply only in states that have established their own exchanges.
Shortly after the D.C. Circuit decision was announced, the Richmond-based Fourth Circuit Court of Appeals ruled in a separate case, King v. Burwell, that the law’s “ambiguous” language allows subsidies to be distributed through federal exchanges. It concluded that the law’s purpose is to expand access to health insurance and therefore the overall intent should prevail.
The differing Appeals Court verdicts tee up a likely Supreme Court challenge, which the administration could well lose. The Supreme Court ruled in a separate case during its most recent session that “an agency may not rewrite clear statutory terms to suit its own sense of how the statute should operate.”
The D.C. Circuit issued its verdict “frankly, with reluctance” because “our ruling will likely have significant consequences.” An estimated 4.5 million people would lose their subsidies in the 36 states that defaulted to a federal exchange. But the court said “high as those stakes are, the principle of legislative supremacy that guides us is higher still.”
The Obama administration is asking the full D.C. Circuit to rehear Halbig, hoping for a different result if all 11 judges vote. But court watchers say such hearings are rare and would cloud the court’s carefully protected political objectivity.
What really is at stake here is the rule of law. The D.C. Circuit said “the government offers no textual basis ... for concluding that a federally established Exchange is, in fact or legal fiction, established by a state.”
If the Supreme Court were to rule correctly, as the D.C. Circuit did, it will send an important signal to the White House that the rule of law must prevail.
The health law was sloppily written, a hodge-podge cobbled to gain the votes of exactly 60 senators. So far, the administration has made 24 changes to the law, most without legal authority.
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Reining in the administration’s extra-legal activities would give authority to the people’s elected representatives in Congress to chart a new path for health reform going forward. And they would.
Republicans are mapping “replace” strategies to protect those receiving subsidies through federal exchanges. But they would do so in a way that protects individual rights, expands choice and encourages genuine price competition to make health care more affordable.
Grace-Marie Turner is president of the Galen Institute (galen.org), a nonprofit research organization focusing on market-based health policy solutions, which submitted amici briefs in both the Halbig and King cases.