By Grace-Marie Turner
While hundreds of people were rallying for religious liberty on a snowy day outside the U.S. Supreme Court Tuesday, there were heated arguments inside a D.C. Circuit Court of Appeals courtroom a few blocks away, both involving challenges to the implementation of the Affordable Care Act.
The Circuit Court, with Judge Thomas. B. Griffith presiding, heard oral arguments in Halbig v. Sebelius about whether tax subsidies for health insurance can be distributed through exchanges established by the federal government.
Sec. 1311 of the Affordable Care Act says that health insurance subsidies are available only “through an Exchange established by the State.” The IRS, however, interpreted the statute to mean that the subsidies also could be distributed through federal exchanges in the 34 states that declined to create their own exchanges.
Judge A. Raymond Randolph indicated he felt the statute was quite clear in repeating “seven times” in that section that the subsidies are available only “through an Exchange established by the State.” He indicated that it “is not up to the courts to fix” a problem that Congress may have created for itself. (Nor, we might add, is it up to the IRS to rewrite the statute in its regulatory interpretation.)
There was a great deal of discussion about legislative intent, with Judge Harry T. Edwards seeming to side with the government in saying that the overall intent of the statue to deliver subsidies should prevail.
Were the states being coerced to set up exchanges to get health insurance subsidies for their citizens or simply being given a neutral choice? That could be a decisive point. The Amicus brief submitted in the case by the Galen Institute concerned the importance of these federalism arguments:
So the ACA offered the States a choice: either take control of the state health insurance market through establishment of a State Exchange and accept the associated federal tax burdens, or yield control of the health insurance market to a federal Exchange and protect local citizens and businesses from the tax penalties associated with the individual and employer mandates. The premium assistance credit for health plans purchased through a State Exchange was intended to sweeten the deal and to encourage States to choose to establish State Exchanges and to accept the accompanying tax burdens. See Adler & Cannon, supra, at 153.
The IRS Rule eliminated the statutory choice by imposing those tax burdens in all States—even those that declined to establish their own Exchanges. The result is a more expansive exertion of federal regulatory control over health insurance than the statute contemplated. Because health insurance is traditionally within the province of State—not federal—regulation, the IRS’s interpretation of the relevant statutes violates the rule that “if Congress intends to alter the ‘usual constitutional balance between the States and the Federal Government,’ it must make its intention to do so ‘unmistakably clear in the language of the statute.’ Gregory, 501 U.S. 452, 460 (1991).
Our 10th amendment arguments in the brief may turn out to be crucially important.
There were several references to former Nebraska Senator Ben Nelson, a former state insurance commissioner who insisted on a strong role for the states in implementing the law. Without his vote, the bill would not have passed.
Judge Randolph was interested in the similarity between the subsidies in the Affordable Care Act and those created in the Trade Adjustment Assistance (TAA) Act of 2002. Both laws provide tax credits for health insurance, and both rely on state participation to administer the subsidies. The TAA required states to pass their own legislation and meet a number of federal tests for their citizens to get the credits. The implication was that, because the mechanisms and language in both statutes are similar, Congress also intended for the states to be able to decide whether to participate in the ACA’s subsidy mechanisms.
Since there is no deadline for a state to establish an exchange, states could later set up an exchange to get the subsidy money if the court were to decide that the statute means what it says.
The case will likely then hinge on how Judge Thomas B. Griffith votes. It is impossible to determine how a judge will vote based upon oral arguments, but his questions seemed more skeptical of the government’s arguments than the plaintiff’s.
Judge Griffith seemed particularly interested in the legislative history of the provision, which is ambiguous, and said that without clarity, the government has a special burden to show why the statutory language should not prevail.
A decision is expected in late June. This is one of three major cases – in Oklahoma, Indiana, and Virginia – challenging the authority of the IRS to rewrite the statute and allow subsidies to flow through the federal exchanges.
Posted on Forbes, March 25, 2014