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Adam J. White: Obamacare’s State of Crisis December 1, 2014

The Weekly Standard, November 24, 2014

In their final push to enact Obamacare, Nancy Pelosi urged her fellow Democrats to “pass the bill so that you can find out what is in it.” They probably should have found out first. Now they need the Supreme Court to “find” once again in their favor.

Last week, the Court announced that it will hear King v. Burwell, one of several challenges to the administration’s interpretation of a key Obamacare provision regarding health insurance markets. Unlike the plaintiffs in the Court’s last Obamacare case, National Federation of Independent Business v. Sebelius (2012), the King plaintiffs do not claim that the Constitution nullifies Obamacare. Rather, they claim that the Obama administration itself is nullifying one of Obamacare’s key provisions. They ask the Court to require the administration to enforce the act’s plain terms as written​—​and this, the law’s critics hope, may cause Obamacare to collapse under its own weight.

The case arises from Obamacare’s provision for health insurance “exchanges”​—​statewide markets for health insurance designed to enable people to obtain health insurance from a source other than employers. While the House’s version of health care legislation provided for a single nationwide exchange, the version of Obamacare that was enacted provides for the creation of an exchange for each state and the District of Columbia.

But the law does not require the states themselves to set up the exchanges​—​in fact, the Constitution prohibits the federal government from forcing states to administer a federal program. Instead, each state had the opportunity to set up its own exchange; and if it declined to do so, the federal Department of Health and Human Services would “establish and operate such [an] Exchange within the State.”

President Obama long had urged that the federal government needed to subsidize health insurance purchased on exchanges to make it sufficiently attractive to poor and middle-class consumers. But the version of Obamacare signed by the president after a flurry of legislative gamesmanship was not written in such generous terms.

The act does provide expressly for federal tax subsidies, called “premium assistance,” for health insurance purchased “through an Exchange established by the State.” But that subsidy​—​and related penalties, for in Obamacare as in life there is no free lunch​—​finds no corresponding provision for health insurance purchased “through an Exchange established by the Federal Government.” Absent such a provision, the federal government is left to argue that this provision must be construed broadly to cover all exchanges, not just state-created ones. Or, as the administration argues, the courts should treat federally created exchanges as actually state-created exchanges, with the secretary of health and human services “stand[ing] in the shoes of” the states.

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