On Tuesday, a federal judge in Washington, D.C., ruled that a legal challenge to Obamacare’s health insurance subsidies may proceed, but denied the challengers’ request to block the subsidies before he makes his final ruling on the case next February.
Unlike the constitutional challenge the Supreme Court ruled on last year, the plaintiffs in Halbig v. Sebelius argue that the language of the Obamacare law itself precludes the payment of health insurance subsidies to people living in the 34 states which declined to set up state-run health insurance exchanges. Oklahoma has a similar challenge pending in another federal court.
The plaintiffs argue that the Patient Protection and Affordable Care Act is exceedingly clear in denying the subsidies. The law only permits subsidies for taxpayers enrolled “through an Exchange established by the State under [section] 1311 of [the Act].” The federal government, on the other hand, was given the authority to create health exchanges under section 1321 of the health law. Exchanges created under the authority of section 1311 are plainly not the same thing as exchanges created under section 1321.
This legislative “glitch” is much more likely to sink the President’s healthcare law than the catastrophic rollout of the online federal exchanges this month. If people in 34 states are not statutorily eligible for insurance subsidies nor subject to the individual or employer mandates that often accompany those subsidies, then Obamacare would be in very deep trouble.
The Internal Revenue Service — not known these days for its nonpartisanship — has done its best to save the controversial healthcare law. Despite the clear language of the law and the lack of any support for its view in the legislative history, the agency concluded in a May 2012 rulemaking that the law was ambiguous and that it could provide subsidies to people living in federal-exchange states anyway.
In other words, the IRS’ rulemaking on the law is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,” which is all the plaintiffs have to prove to win.
Washington Post contributor Michael Gerson summarized the situation best: “the IRS power grab is a reminder of how shoddy the law really is. The whole enterprise is precariously perched atop a flimsy bureaucratic excuse. And the agency providing that excuse is a discredited mess.” Of course, the IRS is still less of a discredited mess than the Department of Health and Human Service, which spent over half a billion dollars and three years developing a federal insurance exchange website that doesn’t work.
The IRS and HHS shouldn’t expect any help from Congress with the legal challenges. Normally, Congress could simply pass an amendment to the law in order to “fix” the problem. However, Obamacare was passed without a single Republican vote during a brief period when Democrats had a legislative supermajority, and the law continues to be vastly unpopular with Americans. Any legislative proposal to save Obamacare today is dead in the water.
Now wouldn’t it be ironic if the “settled” Obamacare law that Democrats fiercely defended during the government shutdown debate ended up being precisely what shuts Obamacare down?
